This paper presents maximum likelihood estimates of a real business cycle model very similar to one Kydland and Prescott [1982] suggested. The results of the paper conflict with Kydland and Prescott’s. The model leaves unexplained much of the variance of two key investment series, namely,...

This paper investigates the role of aggregate shocks on household consumption and labor supply. It posits, estimates and tests a model where the equilibrium behavior of agents sometimes leads them to locate on the boundary of their respective choices sets. The framework is rich enough to nest...