The natural rate hypothesis states that there exists an unemployment rate at which inflation is stable, and that this unemployment rate is independent of aggregate demand shocks. The hysteresis hypothesis, in contrast, states that the long run unemployment rate can be affected by aggregate...

More debt forgiveness directly benefits households but indirectly makes credit more expensive. How does aggregate risk affect this trade-off? In a calibrated general equilibrium life-cycle model, aggregate risk reduces the welfare benefit of making default very costly when the costs are borne by...

This paper seeks to develop an optimal fiscal policy rule for the Colombian economy that interacts with the monetary policy in order to stabilize the product and inflation gap. It proposes a Dynamic Stochastic General Equilibrium model (DSGE) with nominal rigidities and proposes a fiscal rule...

The extent of synchronization of national business cycles is a widespread indicator for gauging whether individual countries are indeed ready to adopt a common currency. The occurrence of asymmetric shocks and their consequences in Economic and Monetary Union (EMU) may hamper implementation of...

Using a panel of OECD countries, this study assesses the linkages between structural policies and macroeconomic stability. Business cycle and time-series characteristics of GDP and its components are employed to define various measures for economic instability and for the persistence of adverse...

Fluctuations of representative agent economies are not very costly. So if business cycles matter, it must be because agents face uninsured idiosyncratic risk which is somehow worsened by aggregate fluctuation. Idiosyncratic risk could be counteracted either through aggregate stabilization or...

A retrospective analysis of the Portuguese business cycle synchronization with some business cycles of reference allows us to draw conclusions that support the vital need to invest in domestic production that, by its nature, being exportable and/or being substitute of imports. From this point of...

The article formulates the general political-economic possibilities for smoothing of business cycles under the realistic assumptions of the current credit-economy. Firstly it endeavours to explain the mechanism of the financial and real economy functioning with an emphasis on banking sector. The...