Christiano, Lawrence J.; Ilut, Cosmin; Motto, Roberto - 2008
and employment all rise and then crash) in response to such a news shock, in a standard real business cycle model. However …, a monetized version of the model which stresses sticky wages and a Taylorrule based monetary policy naturally generates …,sowehavenomovementsinthestockprices.Itishard
to imagine a less successful model of a boom-bust cycle!
We then add habit persistence and costs of adjusting the ow of …