15--Chapter15-Real-Business-Cycle-Theory

Chapter15RealBusinessCycleTheory0102030409091929394959697989900summarySomefactsinbusiness-cycleReal-business-cycletheory’sexplanationtosomeimportanteconomicvariablesExplanationtothefluctuationsofoutput,consumption&investmentExplanationstoemploymentfluctuationExplanationstomonetaryfluctuationEvaluationtoReal-business-cycletheory15.1SomeFactsinBusiness-CycleFountainheadofReal-business-cycletheoryIn1980’s，manypapersgiveexplanationstoeconomicfluctuationsbyrealimpactsinsteadofmonetaryimpacts.Representativeeconomists:EDWORD.PRESCOTT,FENE.KIDLANT,CHARLES.PROSE,JOHN.LONG,ROBERT.KING&ROBERT.BARO.Kiddland-Prose’spaper《TimetoBuildandAggregateFluctuations》in1982begintoformthemodel.15.1SomeFactsinBusiness-CycleCharactersofReal-business-cycletheory：Newdevelopmentsofnewclassicaleconomics,inheritedmostofthemicroassumption.（1）useequilibriummethodtoconstructmacroeconomicmodel；（2）adaptthehypothesisof“rationalanticipation”.Differentfromtraditionalclassicaltheory,attachmuchimportancetosupplyinsteadofmonetaryfluctuation.Thetheoryarguesthatrealimpacts(forexampletechnologyevolution,policychangeandnaturaldisaster)aretheoriginofeconomicfluctuation.15.1SomeFactsinBusiness-CycleBusinesscycleissimilar,andthetimeseriesdataexpresscommonrules,whichincludes:Outputfluctuationsarerelatedtoeachotherthroughdifferentdepartmentswithtimeserialrelation；Industryproduct,consumptionandinvestmentfluctuatesimultaneouslywithcycle,andalsothegovernmentbuy；Investmentchangesmuchmoreseverelythanconsumption；Employmentiswiththecyclewhileunemploymentisagainstcycle；Realwageandaverageproductivityiswiththecycle,andtheformerisonlyslightly；Currencysupplyandstockpriceiswithcycleandleadotherelements；Inflationandnominalinterestiswithcycleandlag；Realinterestisnotseasonal.15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesExplanationstothefluctuationsofoutput,consumption&investmentUsesimplified“Ramsey-Cass-Coopmans”modeltoanalyze：Objectfunctions：tt1tttttt0iittK)1(IK,IC)K(fY.t.s)]C(u[EUEmax0f,0f0;u,0u15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesF.O.C：TVC：)]}1()K('f[)C('u{E)C('u1t1ttt0]K)C('u[Elim1itititti15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesSolvetheproblemassumption：»Utilityfunction»Productfunction»Depreciationratioδ=1calculatetheequation：ttlnC)C(utttKA)K(ftt1ttttKAKKAC和15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesBrigg'slogarithm，weget：Simplifytheequationagain：tt1takkt1-ttacct1-ttayy15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesIf（AR1），theninvestment,outputandconsumptionwillprovetobe（AR2）Inanotherword，realimpactswillaffecttheoutputpermanently.1,aat1tt15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesOutputobeysAR1t1Y时间output’sdeparturefromnaturalratioistransient15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesOutputobeysAR2t1Y时间Technologyimpactsaffectoutputpermanently15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablescalibrationmethod表16.3realdata&kiddland-prescottmodel’ssimulationfluctuation（standarderror）Comparisontosimultaneousresultvariablesrealmodelrealmodeloutput1.761.76--consumption1.290.440.850.85investment8.605.400.920.88Workhours1.661.210.760.95Adaptfrom：YuanZhigang，《macroeconomics》（thesecondedition），page27315.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesExplanationstoemploymentfluctuationLucas&Labin’shypothesis（1969）：Arationalindividualwillnaturallymakesubstitutionsthroughtimesfacingwagefluctuations.whenthewageishigh,theyprefertowork;whenrealwageislow,theywillworkless.15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesOptimalprogrammeforindividualtodecidelaborsupply：222111122111LWS)r1(C,LWSC.t.s)11LlnC(11LlnCmax15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesCalculatetheoptimalprogrammeabove,weget：Itprovesthatlaborsupplywillbeinfluencedbyrelativewageandinterest.112112)WW()]r1([LL15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesRelativewageandinterest’sconcreteinfluencetolaborsupply：Wagemechanism：Transienttechnologyimpactandrealwagechange：relativewagechangesmakeindividualsubstitutethroughtimes；Permanenttechnologyimpactandrealwagechange：laborsupplywillnotchangeInterestmechanism：Ahighinterestwillencourageindividualtoworkmoreandsavemoretosubstitutefuturelabor.15.2Real-Business-CycleTheory’sExplanationtoImportantEconomicVariablesExplanationstomonetaryfluctuationBasicarguments：Currencyisneutralandmonetarypolicydoesn’twork；Currencyistheresultofbusinesscycle.Thepositiverelationbetweencurrencyandoutputisonlytheresponsetoeconomicactivities.15.3EvaluationtoReal-Business-CycleTheorycontributionsDisplaysupplyimpact’simportantruleintheformofbusinesscyclebygeneralequilibriummethod.deficiencyAstoemploymenttheory,commonunemploymentineconomiccrisiscannotbeexpla