This paper argues that a clear understanding of the stochastic growth model can best be achieved by working out an approximate analytical solution. The proposed solution method replaces the true budget constraints and Euler equations of economic agents with loglinear approximations. The model...

The author introduces risk-averse preferences, labor-leisure choice, capital, individual productivity shocks, and market incompleteness to the standard Mortensen-Pissarides model of search and matching and explore the model's cyclical properties. There are four main findings. First and foremost,...

We build a small open economy, real business cycle model with labor market frictions to evaluate the role of employment protection in shaping business cycles in emerging economies. The model features matching frictions and an endogenous selection effect by which inefficient jobs are destroyed in...

Applying Johansen cointegration test to U.S. annual data constructed from the EU KLEMS database, the paper documents that the productivities of consumption-goods and equipment-goods sector are cointegrated. It confirms further, using the non-linear cointegration test framework developed by...

Emerging economies are characterized by higher consumption and real wage variability relative to output and a strongly countercyclical current account. A real business cycle model of a small open economy that embeds a Mortensen-Pissarides type of search-matching frictions and countercyclical...

The postwar U.S. business cycle is characterized by positive comovement of employment and output across sectors. It has been argued that multi-sector growth models are inconsistent with this observation when changes in relative productivities are the main source of fluctuations. We suggest that...

This paper takes a fresh look at the nature of financial and real business cycles in OECD countries using annual data series and shorter quarterly and monthly economic indicators. It first analyses the main characteristics of the cycle, including the length, amplitude, asymmetry and changes of...