From New Classicals to RBC The NCE challenged Keynesian theory,and stimulated the development of NK and RBC Theory NK theory accepts the REH,but emphasizes the importance of imperfect competition,costly or impeded price adjustments,and externalities.It argues that nominal shocks are the predominant cause of business cycles. 电子科大经管学院马捷 6
From New Classicals to RBC The NCE challenged Keynesian theory, and stimulated the development of NK and RBC Theory NK theory accepts the REH, but emphasizes the importance of imperfect competition, costly or impeded price adjustments, and externalities. It argues that nominal shocks are the predominant cause of business cycles. 电子科大经管学院 马捷 6
RBC theory accepts the REH,but views cycles arising in frictionless,perfectly competitive economies with complete markets.It argues that cycles arise through the reactions of optimizing agents to real disturbances,such as random changes in technology or productivity. Guess the model??? 电子科大经管学院马捷
RBC theory accepts the REH, but views cycles arising in frictionless, perfectly competitive economies with complete markets. It argues that cycles arise through the reactions of optimizing agents to real disturbances, such as random changes in technology or productivity. Guess the model??? 电子科大经管学院 马捷 7
Features of RBC Models Like New Classical Economics,the RBC theorists agree that: ·Agents optimize ·Markets clear Therefore,the business cycle is an equilibrium phenomenon, and is optimal! 电子科大经管学院马捷 8 元元兄
Features of RBC Models Like New Classical Economics, the RBC theorists agree that: • Agents optimize • Markets clear Therefore, the business cycle is an equilibrium phenomenon, and is optimal! 电子科大经管学院 马捷 8
Features of RBC Models Adopt a representative agent model,focusing on rep.household and firm,agents homogeneous, so that there are no aggregation problems. All agents have rational expectations. All markets continually clear There are complete markets. There are no informational asymmetries problems. 电子科大经管学院马捷 9
Adopt a representative agent model, focusing on rep. household and firm, agents homogeneous, so that there are no aggregation problems. All agents have rational expectations. All markets continually clear. There are complete markets. There are no informational asymmetries problems. 电子科大经管学院 马捷 9 Features of RBC Models
Firms and households optimize explicit objective functions,subject to resource and technology constraints The cycle is driven by an exogenous shock to productivity. The impact of productivity is amplified by intertemporal s substitution of leisure. The increase in productivity raises the opportunity cost of leisure,causing employment to increase. 电子科大经管学院马捷 10
Firms and households optimize explicit objective functions, subject to resource and technology constraints. The cycle is driven by an exogenous shock to productivity. The impact of productivity is amplified by intertemporal substitution of leisure. The increase in productivity raises the opportunity cost of leisure, causing employment to increase. 电子科大经管学院 马捷 10