Pierre-Yves Henin (Ed.) Advances in Business Cycle Research

Transcription

1 Pierre-Yves Henin (Ed.) Advances in Business Cycle Research

2 Springer-V erlag Berlin Heidelberg GmbH

3 Pierre-Yves Henin (Ed.) Advances in Business Cycle Research With Application to the French and US Economies With 60 Figures Springer

4 Prof. Pierre-Yves Henin CEPREMAP 142, rue du Cheva1eret F-7S013 Paris France ISBN ISBN (ebook) DOI / This work is subject to copyright AII rights are reserved. whether the wbole or part of the material is concerned, specifica11y the rights of trans1ation, reprinting. reuse of illustrations. recitation, broadcasting. reproduction on miaofi1m or in any other way, and storage in data banks. Duplication of this publication or parts iliereof is permitted on1y under the provisions of the Gennan Copyright Law of September in its current version of June Z and a copyright fee must always be paid. Violations fali under the prosecution act of the German Copyright Law. C Springer. Verlag Berlin Heide1berg 1995 OrigiDally published by Springer-Verlag Berlin Heide1berg New York in 1995 Softx:oveJ: reprint of the bardcover lst edilion 1995 The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore &ee for general use. SPIN: Printed on acid-free paper.

5 Acknow ledgments This book has benefited greatly from the patient scrutiny of several of our colleagues of the MAD research unit, who read parts of the typescript and made detailed comments on previous versions of it. We have pleasure in thanking Antoine d'autume, director of the MAD, Jean F r a n ~ Jacques, o i s Philippe Le Gall, Jean-Marc Tallon, Patrick Villieu and all the participants at the MAD workshop. We are particularly indebted to Jean-Marc Tallon for proof reading. At different point in time in the elaboration of the preliminary material of this book, the authors have benefited of financial and scientific support of University of Paris I, University of Paris IX, University of Evry, CEBI, CEME, CEPREMAP and CREST. Finally, we thank the referee of this book and the editor, Dr. Werner A. Muller, who encouraged about this project.

6 Contents On the Theoretical Relevance and Empirical Validity of Augmented Real Business Cycle Models: An Introduction 1 1 Why to Consider Augmented Real Business Cycle Models? 2 2 Walrasian ARBG Models Non Walrasian Models and Other Developments 6 4 Looking at the Future: Beyond ARBG Models. 10 I Advances into RBC Framework 19 1 Presentation and Evaluation of the Real Business Cycles Approach Presentation of the Canonical RBG Model Exposition of the Model The Resolution Method The Economic Mechanisms at the Heart of RBG Models The Evaluation of RBG Approach The Stylized Facts of the French and US Fluctuations Calibration Cyclical Properties of the Model Concluding Comments Appendix: Solving the Linear System A RBC Model for Explaining Cyclical Labor Market Features Productivity, Labor Productivity and Business Cycle The Solow Residual in RBG Models Labor Productivity Cycle: a Stylized Fact The Model The Firms The Households The Government The Planner's Decision Rules Solution Method and Calibration Impulse Response Functions for Technological and Government Spending Shocks

7 VIn Technological Shocks Government Spending Shock. 2.5 Simulation Results The USA France Conclusion of the Quantitative Analysis 2.6 Concluding Comments Appendix Cash-In-Advance Constraint and the Business Cycle The Model The Neoclassical Growth Model with Cash-In- Advance How to Solve the Model? Dynamic Features of the Cash-In-Advance Constraint Model Transitional Dynamics Instantaneous Responses to a Technological Shock Instantaneous Responses to a Monetary Shock Can a Cash-In-Advance Constraint Account for the Role of Monetary Shocks in the Business Cycle? Simulation Method and Calibration Issues The Specific Role of Monetary Shocks in Cash- In-Advance Models Monetary Shocks and Cash-In-Advance Constraint: a Counter-Factual Impulsion-Propagation Scheme Concluding Comments Appendix The International Transmission of Real Business Cycles A One-Sector, Two-Country Model Preferences Technology Constraints Model Resolution Impulse Response to Productivity and Government Spending Shocks Effects of Productivity Shock Effects of Government Spending Shock Model Predictions and International Business Cycles The Stylized Facts Model Predictions Concluding Comments Appendix A Small Open Economy RBC Model: the French Economy C ~ 1" 5.1 The RBG Model of the French Economy Technology and Preferences

8 5.1.2 Optimal Behavior of Households and Firms Competitive Equilibrium of the Economy Stationarization and Linearization of the Model Two Exercises of Model Validation Parameter Calibration of the Benchmark Model Traditional Validation by Moment Comparison Impulse Response Functions of the RBCand VAR Models Concluding Comments IX II Advances beyond RBC Framework Nominal Rigidities and Monopolistic Competition: A New-Keynesian View The Model A Monopolistic Competition Model with Money in the Utility Function Definition and Resolution of the Equilibrium Monetary Disturbances and Business Cycle in France and the United States Parameter Calibration Estimation of the Exogenous Shocks Processes The Effect of Monetary Shocks, Monopolistic Competition and Price Stickiness The Effect of Increasing Returns The Model and the Business Cycle on US and French Data Impulse Responses to Technological and Monetary Shocks Concluding Comments Appendix Nominal Wage Contracts and the Short-Run Dynamics of Real Wages The Model The Economic Environment The Competitive Equilibrium of the Economy without Wage Contracts The Equilibrium with Nominal Wage Contracts The Mechanisms of the Model Calibration The Walrasian Model with Interrelated Adjustment Costs The Model with Interrelated Adjustment Costs and Contracts Validation The Stylized Facts Does the Model Match the Data?. 270

9 x Nominal Shocks and Short-Run Dynamics of Real Wages Unemployment and Business Cycle: a General Equilibrium Matching Model The Model The Labor Market The Firm The Household The Symmetric General Equilibrium The Wage Bargaining Process and the Search Intensity Decision Rational Expectations Equilibrium Resolution Method Results Impulse Response Functions Does the Model Match the U.S. Business Cycle? Does the Model Match the French Business Cycle? Concluding Comments Business Cycle and Endogenous Growth : Learning by Doing versus Rationalizing Presentation of the Model The Households The Government Expenditures The Firms Accumulation Processes Solving the Model The Representative Firm Problem The Household Problem The Competitive Equilibrium Simulation Methodology Analysis of the Dynamics Transitional Dynamics Responses to Stochastic Shocks Cyclical Implications of the Sign of Persistence Stochastic Simulation Methodology Simulation Results Concluding Comments Appendix Statistical Evaluation of the RBC Model 10.1 The Canonical Real Business Cycle Model The Model Solution Method Estimation Method, Testing and Stochastic Simulation Implementing the Generalized Method of Moments Testing

10 Parameter Uncertainty and Stochastic Simulations Empirical Results Estimation of the Structural Parameters \ Statistical Tests of the RBC Propositions loa Concluding Comments Appendix XI