In this article I provide a perspective on the current state of modern business cycle theory. This theory has developed from an application of the Arrow-Debreu general equilibrium framework to the neoclassical growth model. On the positive side, this approach is able to accommodate various...

In this article I provide a perspective on the current state of modern business cycle theory. This theory has developed from an application of the Arrow-Debreu general equilibrium framework to the neoclassical growth model. On the positive side, this approach is able to accommodate various...

In this paper we present a simple, theory-based measure of the variations in aggregate economic efficiency associated with business fluctuations. We decompose this indicator, which we refer to as the gap, into two constituent parts: a price markup and a wage markup, and show that the latter...