Kvalitativa koncept FL5 - EC7210

Question 1

Vad är det huvudsalkiga innehåller i RBC (Real Business Cycle) teorin?

Answer 1

• Short-run fluctuations in a model without imperfections.
• Real disturbances.
• Optimisation under uncertainty.
• Log-linearisation.

Question 2

Vad menas med procykliska, kontracykliska och acykliska variabler?

Answer 2

Procyclical variable: tends to increase in booms, decrease in recessions (e.g. employment, inflation).

• Counteryclical variable: tends to decrease in booms, increase in recessions (e.g. unemployment).
• Acyclical variable: no systematic behaviour over the business cycle.

Question 3

Vilka olika synsätt finns gällande konjunkturcykler?

Answer 3

• Real Business Cycle (RBC) theory: fluctuations caused by productivity shocks to markets without imperfections.
• New-Keynesian (NK) models: fluctuations caused by shocks exacerbated by market imperfections.

New-Keynesians: policy useful in correcting disturbances.

Proponents of RBC theory: policy meaningless, possibly harmful.

Question 4

Vilken modell liknar RB och varför?

Answer 4

RCK neo klassiska tillväxtmodell.

Both frameworks are Walrasian: competitive settings without imperfections, i.e. externalities, information asymmetries or missing markets.

RCK: the long-run effects of continuous technological progress.

The RBC framework: business cycle effects of short-run variations in technology.

Extensions to RCK är
Introduce uncertainty in terms of real disturbances:
a. Technology shocks.
b. Changes in government purchases.

and this model endogenous labour supply to allow for employment fluctuations.

In RCK we learned that, in the absence of shocks, this economy converges to a BGP and stays there in perpetuity.

In the RBC model, we expose the economy to shocks, i.e. disturbances that cause fluctuations.

Two stochastic processes drive these business cycles:

(i) Technology.
(ii) Government.2

Question 5

Kan man lösa RBC?

Answer 5

The model cannot be solved analytically.

We will instead log-linearise the model around the path the model would follow in the absence of shocks.

Log-linearisation: approximate analytical solution.