This paper examines the business cycle linkages that propagate industry-specific business cycle shocks throughout the economy in a way that (sometimes) generates aggregated cycles. The transmission of sectoral business cycles is modelled through a multivariate Markov-switching model, which is...

This paper points out an empirical failing of real business cycle models in which unemployment is endogenized through a matching function. One can easily choose a calibration to make the cyclical fluctuation in unemployment as large in the model as it is in the data, or to make the response of...

The role of unanticipated changes in money growth for aggregate fluctuations is reexamined using the methods of quantitative equilibrium business cycle theory. A stochastic growth model with money is constructed that has the feature, following Lucas (1972, 1975), that production and trade take...

Recent work on the effects of permanent technology shocks argue that the basic RBC model cannot account for a negative correlation between hours worked and labor productivity. In this paper, I show that this conjecture is not necessarily correct. In the basic RBC model, I find that hours worked...

This paper puts forward a systematic approach to teaching simple dynamic stochastic general equilibrium (DSGE) models to undergraduates. It proceeds in the following way: first, the structural model of the economy, which includes the households' and firms' problems, is presented and...

We solve a real business cycle model with rational inattention (an RI-RBC model). In the RI-RBC model, the growth rates of employment, investment, and output are about as persistent as in the data, with an amount of inattention consistent with survey data on expectations. Moreover, consumption,...

This paper explores the business cycle in Bulgaria and the Baltic countries: Estonia, Latvia and Lithuania during the 1993-2005 period. The paper aims at deepening the understanding of the nature of output fluctuations. The neoclassical approach will be employed, much in the spirit of the real...

This paper shows that a modified real business cycle (RBC) model, one that includes home production and fiscal spending shocks, can solve one of the RBC puzzles and generates zero correlation between wages and hours. In addition, the micro-founded model presented here provides a sound...

This paper explores the business cycle in Bulgaria and the Baltic countries: Estonia, Latvia and Lithuania during the 1993-2005 period. The paper aims at deepening the understanding of the nature of output fluctuations. The neoclassical approach will be employed, much in the spirit of the Real...

This paper shows that a modified real business cycle (RBC) model, one that includes home production and fiscal spending shocks, can solve one of the RBC puzzles and generates zero correlation between wages and hours. In addition, the micro-founded model presented here provides a sound...