A Macroeconomics Reader

By Brian Snowdon; Howard R. Vane | Go to book overview

NOTES
1
Others (e.g. Barro 1981; Long and Plosser 1983) have argued that these fluctuations are not inconsistent with competitive theory that abstracts from monetary factors. Our finding is much stronger, standard theory predicts that the economy will display the business cycle phenomena.
2
See Solow (1970) for a nice summary of the growth observations.
3
Actually, the average interest rate is slightly lower because of risk premia. Given the value of γ and the amount of uncertainty, the average premium is only a fraction of a percent. See Mehra and Prescott (1985) for further details.
4
I use Hansen’s (1984) human capital-weighted, household hour series. The capital stock and GNP series are from Citicorp’s Citibase data bank.
5
The process zt+1=.9zt+∊t+1 is, like the random walk process, highly persistent. Kydland and I find that it and the random walk result in essentially the same fluctuations.
6
Hotz, et al. (1985) use annual panel data to estimate α0 and η and obtain estimates near the Kydland-Prescott assumed values.
7
Altug (1983) has introduced two types of capital with different gestation periods. Using formal econometric methods, she finds evidence that the model’s fit is improved if plant and equipment investment are not aggregated.

REFERENCES

a
Altug, S. (1983) ‘Gestation lags and the business cycle’, Working paper, CarnegieMellon University.
Ashenfelter, O. (1984) ‘Macroeconomic analyses and microeconomic analyses of labor supply’, in Essays on Macroeconomic Implications of Financial and Labor Markets and Political Processes, K. Brunner and A. H. Meltzer (eds), Carnegie-Rochester Conference Series on Public Policy 21:117-55, Amsterdam: North-Holland.

b
Bain, I. R. M. (1985) ‘A theory of the cyclical movements of inventory stocks’, Ph. D. dissertation, University of Minnesota.
Barro, R. J. (1981) ‘Intertemporal substitution and the business cycle’, in Supply Shocks, Incentives and National Wealth, K. Brunner and A. H. Meltzer (eds), Carnegie-Rochester Conference Series on Public Policy 14:237-68, Amsterdam: North-Holland.
Benhabib, J. and Nishimura, K. (1985) ‘Competitive equilibrium cycles’, Journal of Economic Theory 35:284-306.
Bewley, T. F. (1972) ‘Existence of equilibria in economies with infinitely many commodities’, Journal of Economic Theory 4:514-40.
Blinder, A. S. (1984) ‘Can the production smoothing model of inventory behavior be saved’, Working paper, Princeton University.
Brock, W. A. and Mirman, L. J. (1972) ‘Optimal economic growth and uncertainty: the discounted case’, Journal of Economic Theory 4:479-513.

c
Cass, D. (1965) ‘Optimum growth in an aggregative model of capital accumulation’, Review of Economic Studies 32:233-40.

d
Debreu, G. (1954) ‘Valuation equilibrium and Pareto optimum’, Proceedings of the National Academy of Science 70:558-92.

e
Eichenbaum, M. S., Hansen, L. P., and Singleton, K. S. (1984) ‘A time series analysis of representative agent models of consumption and leisure choice under uncertainty’, Working paper, Carnegie-Mellon University.

f
Friend, I. and Blume, M. E. (1975) ‘The demand for risky assets’, American Economic Review 65:900-22.

-386-

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