nep-dge New Economics Papers
on Dynamic General Equilibrium
Issue of 2009‒10‒31
25 papers chosen by
Christian Zimmermann
University of Connecticut

  1. Overborrowing and systemic externalities in the business cycle By Javier Bianchi
  2. Continuous-Time Overlapping Generations Models By Hippolyte D'Albis; Emmanuelle Augeraud-Véron
  3. Stock market wealth effects in an estimated DSGE model for Hong Kong By Funke, Michael; Paetz , Michael; Pytlarczyk, Ernest
  4. State-dependent pricing, local-currency pricing, and exchange rate pass-through By Anthony Landry
  5. How robust are popular models of nominal frictions? By Benjamin D. Keen; Evan F. Koenig
  6. Growth and Keeping up with the Joneses By Wendner, Ronald
  7. The Demographics of Innovation and Asset Returns By Nicolae Gârleanu; Leonid Kogan; Stavros Panageas
  8. Rising indebtedness and hyperbolic discounting: a welfare analysis By Makoto Nakajima
  9. Indirect taxation and the welfare effects of altruism on the optimal fiscal policy By Carlos Garriga; Fernando Sánchez-Losada
  10. Optimal Unemployment Insurance with Monitoring By Setty, Ofer
  11. Optimal Monetary Policy When Asset Markets are Incomplete By R. Anton BRAUN; NAKAJIMA Tomoyuki
  12. On the non-causal link between volatility and growth By Olaf POSCH; Klaus W€LDE
  13. Cointegrated TFP processes and international business cycles By Pau Rabanal; Juan F. Rubio-Ramirez; Vicente Tuesta
  14. On the fiscal treatment of life expectancy related choices By Julio Davila; Marie-Louise Leroux
  15. Brain Drain and Brain Return: Theory and Application to Eastern-Western Europe By Karin Mayr; Giovanni Peri
  16. The Environment and Directed Technical Change By Daron Acemoglu; Philippe Aghion; Leonardo Bursztyn; David Hemous
  17. Firm Dynamics Support the Importance of the Embodied Question By Alain Gabler; Omar Licandro
  18. Time-varying capital requirements in a general equilibrium model of liquidity dependence By Francisco Covas; Shigeru Fujita
  19. Foreclosures and house price dynamics: a quantitative analysis of the mortgage crisis and the foreclosure prevention policy By Satyajit Chatterjee; Burcu Eyigungor
  20. Public and private sector wages interactions in a general equilibrium model. By Gonzalo Fernàndez-de-Córdoba; Javier J. Pérez; José L. Torres
  21. Worthy Transfers ? A Dynamic Analysis of TurkeyÕs Accession to the European Union By GŸl ERTAN …ZG†ZER; Luca PENSIEROSO
  22. Wage dispersion and wage dynamics within and across firms By Carlos Carrillo-Tudela; Eric Smith
  23. Money Talks. By Marie Hoerova; Cyril Monnet; Ted Temzelides
  24. Monetary policy implementation frameworks: a comparative analysis By Antoine Martin; Cyril Monnet
  25. New classical/real business cycle macroeconomics. The anatomy of a revolution By Michel DE VROEY

  1. By: Javier Bianchi
    Abstract: Credit constraints that link a private agent’s debt to market-determined prices embody a credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. The externality arises because agents fail to internalize the debt-deflation effects of additional borrowing when negative income shocks trigger the credit constraint. We quantify the effects of this inefficiency in a two-sector dynamic stochastic general equilibrium model of a small open economy calibrated to emerging markets. The credit externality increases the probability of financial crises by a factor of seven and causes the maximum drop in consumption to increase by 10 percentage points.
    Date: 2009
  2. By: Hippolyte D'Albis (LERNA - Economie des Ressources Naturelles - INRA : UR1081 - CEA : DPG - Université des Sciences Sociales - Toulouse I); Emmanuelle Augeraud-Véron (MIA - Mathématiques, Image et Applications - Université de La Rochelle : EA3165)
    Abstract: Age structured populations are studied in economics through overlapping generations models. These models allow for a realistic characterization of life-cycle behaviors and display intertemporal equilibrium that are not necessarily efficient. This article uses the latest developments in continuous time overlapping generations models to show the influence of the vintage structure of the population on the volatility of intertemporal prices. Permanent cycles can be found on the neighborhood of steady-states while the transitional dynamics are generically governed by short run fluctuations.
    Keywords: overlapping generations; continuous time; life-cycle; intertemporal prices.
    Date: 2009–06–03
  3. By: Funke, Michael (BOFIT); Paetz , Michael (BOFIT); Pytlarczyk, Ernest (BOFIT)
    Abstract: This paper develops and estimates an open economy dynamic stochastic general equilibrium (DSGE) model of the Hong Kong economy. The model features short-run price rigidities generated by monopolistic competition and staggered reoptimisation. The model is enhanced with wealth effects due to stock price dynamics, which we believe to be important. For this reason we adopt a perpetual youth approach. Model parameters and unobserved components are estimated with a Bayesian maximum likelihood procedure, conditional on prior information concerning the values of parameters.
    Keywords: DSGE models; wealth effects; open economy; Hong Kong
    JEL: D91 E21 E44 F41
    Date: 2009–10–21
  4. By: Anthony Landry
    Abstract: This paper presents a two-country DSGE model with state-dependent pricing as in Dotsey, King, and Wolman (1999) in which firms price-discriminate across countries by setting prices in local currency. In this model, a domestic monetary expansion has greater spillover effects to foreign prices and foreign economic activity than an otherwise identical model with time-dependent pricing. In addition, the predictions of the state-dependent pricing model match the business-cycle moments better than the predictions of the time-dependent pricing model when driven by monetary policy shocks.
    Keywords: Pricing ; Foreign exchange rates ; Equilibrium (Economics) - Mathematical models ; Monetary policy ; Price discrimination
    Date: 2009
  5. By: Benjamin D. Keen; Evan F. Koenig
    Abstract: This paper analyzes three popular models of nominal price and wage frictions to determine which best fits post-war U.S. data. We construct a dynamic stochastic general equilibrium (DSGE) model and use maximum likelihood to estimate each model's parameters. Because previous research finds that the conduct of monetary policy and the behavior of inflation changed in the early 1980s, we examine two distinct sample periods. Using a Bayesian, pseudo-odds measure as a means for comparison, a sticky price and wage model with dynamic indexation best fits the data in the early-sample period, whereas either a sticky price and wage model with static indexation or a sticky information model best fits the data in the late-sample period. Our results suggest that price- and wage-setting behavior may be sensitive to changes in the monetary policy regime. If true, the evaluation of alternative monetary policy rules may be even more complicated than previously believed.
    Keywords: Econometric models - Evaluation ; Business cycles - Econometric models ; Monetary policy ; Price levels ; Wages
    Date: 2009
  6. By: Wendner, Ronald
    Abstract: This paper investigates the impact of the desire to keep up with the Joneses (KUJ) on economic growth and optimal tax policy in a continuous time overlapping generations model with AK technology and gradual retirement. Due to the desire to KUJ, the propensity to consume out of total wealth rises (declines), and the balanced growth rate declines (increases) when the households' individual total (accumulated \emph{and} human) wealths are increasing (decreasing) with age. The rate of retirement determines whether or not a household's total wealth is increasing with age. If total wealth is increasing/decreasing with age, an optimal allocation is decentralized by a lump sum tax system that is progressive/regressive in age. The desire to KUJ strengthens the intergenerational regressivity (progressivity) of the optimal tax system.
    Keywords: Keeping up with the Joneses; AK growth; overlapping generations; gradual retirement; optimal taxation
    JEL: D91 O40 E21
    Date: 2009–10–19
  7. By: Nicolae Gârleanu; Leonid Kogan; Stavros Panageas
    Abstract: We study asset-pricing implications of innovation in a general-equilibrium overlapping-generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of inter-generational risk sharing, innovation creates a systematic risk factor, which we call "displacement risk.'' This risk helps explain several empirical patterns, including the existence of the growth-value factor in returns, the value premium, and the high equity premium. We assess the magnitude of displacement risk using estimates of inter-cohort consumption differences across households and find support for the model.
    JEL: G10 G12
    Date: 2009–10
  8. By: Makoto Nakajima
    Abstract: Is the observed rapid increase in consumer debt over the last three decades good news for consumers? This paper quantitatively studies macroeconomic and welfare implications of relaxing borrowing constraints when consumers exhibit a hyperbolic discounting preference. In particular, the author constructs a calibrated general equilibrium life-cycle model with uninsured idiosyncratic earnings shocks and a quasi-hyperbolic discounting preference and examines the effect of relaxation of the borrowing constraint which generates increased indebtedness. The model can capture the two contrasting views associated with increased indebtedness: the positive view, which links increased indebtedness to financial sector development and better insurance, and the negative view, which associates increased indebtedness with consumers' over-borrowing. He finds that while there is a welfare gain as large as 0.4 percent of flow consumption from a relaxed borrowing constraint, which is consistent with the observed increase in aggregate debt between 1980 and 2000 in the model with standard exponential discounting consumers, there is a welfare loss of 0.2 percent in the model with hyperbolic discounting consumers. This result holds in spite of the observational similarity of the two models; the macroeconomic implications of a relaxed borrowing constraint are similar between the two models. Cross-sectionally, although consumers of high and low productivity gain and medium productivity consumers suffer due to a relaxed borrowing constraint in both models, the welfare gain of low-productivity consumers is substantially reduced (and becomes negative in the case of strong hyperbolic discounting) in the hyperbolic discounting model due to the welfare loss from over-borrowing. Finally, the author finds that the optimal (social welfare maximizing) borrowing limit is 15 percent of average income, which is substantially lower than both the optimal level implied by the exponential discounting model (37 percent) and the level of the U.S. economy in 2000 implied by the model (29 percent).
    Keywords: Debt ; Econometric models
    Date: 2009
  9. By: Carlos Garriga; Fernando Sánchez-Losada
    Abstract: This paper analyzes the welfare effects of altruism on the optimal fiscal policy. The existence of positive bequests links present and future generations in the economy. We show that these altruistic links provide a new role for indirect taxation (consumption and estate taxes) with important welfare implications. We use three different altruistic approaches (warm-glow, dynastic, and family) to illustrate how the presence of bequests in the budget constraint of the donee gives the government the ability to use indirect taxation to mimic lump-sum taxation and to implement the first-best outcome in the long-run. This channel is not present in economies without altruism, such as the infinite-lived consumer economy or the overlapping generations economy, where long-run welfare is suboptimal and indirect taxation is irrelevant.
    Keywords: Taxation ; Fiscal policy
    Date: 2009
  10. By: Setty, Ofer
    Abstract: Monitoring the job-search activities of unemployed workers is a common government intervention. Typically, a caseworker reviews the unemployed worker's employment contacts at some frequency, and applies sanctions if certain requirements are not met. I model monitoring in the optimal unemployment insurance framework of Hopenhayn and Nicolini (1997), where job-search effort is private information for the unemployed worker. In the model, monitoring provides costly information upon which the government conditions the unemployment benefits. In the optimal monitoring scheme, endogenous sanctions and rewards, together with random monitoring, create effective job-search incentives for the unemployed worker. I calibrate the model to the US economy and find that the addition of optimal monitoring to the optimal unemployment insurance scheme decreases the variance of consumption by about two thirds and eliminates roughly half of the government's cost. I also find that compared with the optimal monitoring scheme, US states monitor too much and impose the sanctions over too short a time span. For the US on average, shifting to the optimal monitoring policy would generate savings of about $500 per unemployment spell.
    Keywords: Recursive Contracts; Unemployment Insurance; Job Search Monitoring
    JEL: H21 J65 J64 D82
    Date: 2009–01–06
  11. By: R. Anton BRAUN; NAKAJIMA Tomoyuki
    Abstract: his paper considers the properties of an optimal monetary policy when households are subject to counter-cyclical uninsured income shocks. We develop a tractable incomplete-markets model with Calvo price setting. In our model the welfare cost of business cycles is large when the variance of income shocks is counter-cyclical. Nevertheless, the optimal monetary policy is very similar to the optimal policy that emerges in the representative agent framework and calls for nearly complete stabilization of the price-level.
    Date: 2009–10
  12. By: Olaf POSCH (Aarhus University and CREATES, CESifo); Klaus W€LDE (University of Mainz, CESifo, and UCL Louvain la Neuve)
    Abstract: A model highlighting the endogeneity of both volatility and growth is presented. Volatility and growth are therefore correlated but there is no causal link from volatility to growth. This joint endogeneity is illustrated by working out the effects through which economies with different tax levels differ both in their volatility and growth. Using a continuous-time DSGE model with plausible parametric restrictions, we obtain closedform measures of macro volatility based on cyclical components and output growth rates. Given our results, empirical volatility-growth analysis should include controls in the conditional variance equation. Otherwise an omitted variable bias is likely.
    Keywords: Tax effects, Volatility measures, Poisson uncertainty, Endogenous cycles and growth, Continuous-time DSGE models
    JEL: E32 E62 H3 C65
    Date: 2009–08–27
  13. By: Pau Rabanal; Juan F. Rubio-Ramirez; Vicente Tuesta
    Abstract: A puzzle in international macroeconomics is that observed real exchange rates are highly volatile. Standard international real business cycle (IRBC) models cannot reproduce this fact. We show that total factor productivity processes for the United States and the rest of the world are characterized by a vector error correction model (VECM) and that adding cointegrated technology shocks to the standard IRBC model helps explaining the observed high real exchange rate volatility. Also, we show that the observed increase of the real exchange rate volatility with respect to output in the past twenty years can be explained by changes in the parameter of the VECM.
    Date: 2009
  14. By: Julio Davila (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CORE - Université Catholique de Louvain); Marie-Louise Leroux (CORE - Université Catholique de Louvain)
    Abstract: In an overlapping generations economy setup we show that, if individuals can improve their life expectancy by exerting some effort, costly in terms of either resources or utility, the competitive equilibrium steady state differs from the first best steady state. This is due to the fact that under perfect competition individuals fail to anticipate the impact of their longevity-enhancing effort on the return of their annuitized savings. We indentify the policy instruments required to implement the first-best into a competitive equilibrium and show that they are specific to the form, whether utility or resources, that the effort takes.
    Keywords: Life expectancy, health expenditures, taxation.
    Date: 2009–09
  15. By: Karin Mayr; Giovanni Peri (Department of Economics, University of California, Davis, USA)
    Abstract: Recent empirical evidence seems to show that temporary migration is a widespread phenomenon, espe- cially among highly skilled workers who return to their countries of origin when these begin to grow. This paper develops a simple, tractable overlapping generations model that provides a rationale for return migra- tion and predicts who will migrate and who returns among agents with heterogeneous abilities. The model also incorporates the interaction between the migration decision and schooling: the possibility of migrating, albeit temporarily, to a country with high returns to skills produces positive schooling incentive effects. We use parameter values from the literature and data on return migration to simulate the model for the Eastern-Western European case. We then quantify the effects that increased openness (to migrants) would have on human capital and wages in Eastern Europe. We find that, for plausible values of the parameters, the possibility of return migration combined with the education incentive channel reverses the brain drain into a significant brain gain for Eastern Europe.
    Keywords: Skilled Migration, Return Migration, Returns to Education, Eastern-Western Europe
    JEL: F22 J61 O15
    Date: 2009–10
  16. By: Daron Acemoglu; Philippe Aghion; Leonardo Bursztyn; David Hemous
    Abstract: This paper introduces endogenous and directed technical change in a growth model with environmental constraints and limited resources. A unique final good is produced by combining inputs from two sectors. One of these sectors uses "dirty" machines and thus creates environmental degradation. Research can be directed to improving the technology of machines in either sector. We characterize dynamic tax policies that achieve sustainable growth or maximize intertemporal welfare, as a function of the degree of substitutability between clean and dirty inputs, environmental and resource stocks, and cross-country technological spillovers. We show that: (i) in the case where the inputs are sufficiently substitutable, sustainable long-run growth can be achieved with temporary taxation of dirty innovation and production; (ii) optimal policy involves both "carbon taxes" and research subsidies, so that excessive use of carbon taxes is avoided; (iii) delay in intervention is costly: the sooner and the stronger is the policy response, the shorter is the slow growth transition phase; (iv) the use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire when the two inputs are substitutes. Under reasonable parameter values (corresponding to those used in existing models with exogenous technology) and with sufficient substitutability between inputs, it is optimal to redirect technical change towards clean technologies immediately and optimal environmental regulation need not reduce long-run growth. We also show that in a two-country extension, even though optimal environmental policy involves global policy coordination, when the two inputs are sufficiently substitutable environmental regulation only in the North may be sufficient to avoid a global disaster.
    JEL: C65 O30 O31 O33
    Date: 2009–10
  17. By: Alain Gabler; Omar Licandro
    Abstract: This paper contributes to the literature on both embodied technical progress and firm dynamics, by formulating an endogenous growth model where selection and imitation play a fundamental role in helping capital good producers to learn about the productivity of technologies embodied in new plants. By calibrating the model to some key aggregates particularly relevant for the embodied capital literature, among them the growth rate of the relative investment price, the model quantitatively replicates the main facts associated to firm dynamics, such as the entry rate and the tail index of the establishment size distribution. In line with the previous literature, it also predicts a contribution to productivity growth of embodied technical progress and selection of around 60%.
    Keywords: endogenous growth; investmentspecific technological change; selection and imitation; firm entry and exit
    JEL: B52 O3 O41
    Date: 2009
  18. By: Francisco Covas; Shigeru Fujita
    Abstract: This paper attempts to quantify business cycle effects of bank capital requirements. The authors use a general equilibrium model in which financing of capital goods production is subject to an agency problem. At the center of this problem is the interaction between entrepreneurs' moral hazard and liquidity provision by banks as analyzed by Holmstrom and Tirole (1998). They impose capital requirements on banks and calibrate the regulation using the Basel II risk-weight formula. Comparing business cycle properties of the model under this procyclical regulation with those under hypothetical countercyclical regulation, the authors find that output volatility is about 25 percent larger under procyclical regulation and that this volatility difference implies a 1.7 percent reduction of the household's welfare. Even with more conservative parameter choices, the volatility and welfare differences under the two regimes remain nonnegligible.
    Keywords: Bank capital ; Business cycles ; Bank reserves
    Date: 2009
  19. By: Satyajit Chatterjee; Burcu Eyigungor
    Abstract: The authors construct a quantitative equilibrium model of the housing market in which an unanticipated increase in the supply of housing triggers default mortgages via its effect on house prices. The decline in house prices creates an incentive to increase the consumption of housing space, but leverage makes it costly for homeowners to sell their homes and buy bigger ones (they must absorb large capital losses). Instead, leveraged households find it advantageous to default and rent housing space. Since renters demand less housing space than homeowners, foreclosures are a negative force affecting house prices. The authors explore the possible effects of the government's foreclosure prevention policy in their model. They find that the policy can temporarily reduce foreclosures and shore up house prices.
    Keywords: Housing ; Default (Finance) ; Foreclosure
    Date: 2009
  20. By: Gonzalo Fernàndez-de-Córdoba (Universidad de Salamanca, Campus Miguel de Unamuno, Salamanca, E-23007 Salamanca, España.); Javier J. Pérez (Banco de España, Alcalá 50, E-28014 Madrid, España.); José L. Torres (Universidad de Málaga, E-29004 Málaga, España.)
    Abstract: This paper develops a dynamic general equilibrium model in which the public and the private sector interact in the labor market. Previous studies that analyze the labor market effects of public sector employment and wages have mostly assumed exogenous rules for public wage and public employment. We show that theories that equalize wages with marginal products in the private sector can rationalize the interaction of public and private sector wages when extended to accommodate a non-trivial government sector/public sector union that endogenously determines public employment and wages. Our model suggests a positive correlation between public and private sector wages. Any increase in tax revenues, coupled with the existence of a positive public-private sector wage gap, makes working in the public sector an attractive option. Thus, a positive neutral productivity shock increases public and private sector wages. More interestingly, even a private-sector specific productivity shock spills-over to the public sector, increasing public wages. These facts lend some support to the wage leading role of the private sector. Nevertheless, at the same time, a positive shock to public sector wages would lead to an increase in private sector wages, via the flow of workers from the private to the public sector. JEL Classification: C32, J30, J51, J52, E62, E63, H50.
    Keywords: Public wages, public employment, labor market, trade unions.
    Date: 2009–10
  21. By: GŸl ERTAN …ZG†ZER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Luca PENSIEROSO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) FNRS)
    Abstract: In this paper, we build a two-country dynamic general equilibrium model to study whether European citizens would benefit from the eventual accession of Turkey to the European Union. The results ofthe simulations show that Turkey's accession to the European Union is welfare enhancing for Europeans, provided that Turkish total factor productivity (TFP) increases sufficiently after enlargement. In the model with no capital mobility, the Europeans are better off it the Turkish TFP increase bridges more than 31% of the initial TFP gap between Turkey and the European Union. That figure becomes 45% when capital mobility is introduced.
    Keywords: European Union, Turkey, Enlargement, Dynamic General Equilibrium, Open Economy Macroeconomics
    JEL: F41
    Date: 2009–10–01
  22. By: Carlos Carrillo-Tudela; Eric Smith
    Abstract: This paper examines wage dispersion and wage dynamics in a stock-flow matching economy with on-the-job search. Under stock-flow matching, job seekers immediately become fully informed about the stock of viable vacancies. If only one option is available, monopsony wages result. With more than one firm bidding, Bertrand wages arise. The initial and expected threat of competition determines the evolution of wages and thereby introduces a novel way of understanding wage differences among similar workers. The resulting wage distribution has an interior mode and prominent, well-behaved tails. The model also generates job-to-job transitions with both wage cuts and jumps.
    Date: 2009
  23. By: Marie Hoerova (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Cyril Monnet (Federal Reserve Bank of Philadelphia, Research Department, Ten Independence Mall, Philadelphia, PA 19106-1574, USA.); Ted Temzelides (Rice University, Department of Economics, P.O. Box 1892, Houston, TX 77251-1892, USA.)
    Abstract: We study credible information transmission by a benevolent Central Bank. We consider two possibilities: direct revelation through an announcement, versus indirect information transmission through monetary policy. These two ways of transmitting information have very different consequences. Since the objectives of the Central Bank and those of individual investors are not always aligned, private investors might rationally ignore announcements by the Central Bank. In contrast, information transmission through changes in the interest rate creates a distortion, thus, lending an amount of credibility. This induces the private investors to rationally take into account information revealed through monetary policy. JEL Classification: D80, E40, E52.
    Keywords: Information, Interest rates, Monetary policy.
    Date: 2009–09
  24. By: Antoine Martin; Cyril Monnet
    Abstract: The authors compare two stylized frameworks for the implementation of monetary policy. The first framework relies only on standing facilities, while the second framework relies only on open market operations. They show that the Friedman rule cannot be implemented when the central bank uses standing facilities, while it can be implemented with open market operations. For a given rate of inflation, the authors show that standing facilities unambiguously achieve higher welfare than just conducting open market operations. They conclude that elements of both frameworks should be combined. Also, their results suggest that any monetary policy implementation framework should remunerate both required and excess reserves.
    Keywords: Monetary policy ; Open market operations ; Banks and banking, Central
    Date: 2009
  25. By: Michel DE VROEY (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: The aim of the present paper is to assess the new classical/real business cycle revolution, which dethroned Keynesian macroeconomics. In its first part, I critically discuss the microfoundations requirement that constitutes a cornerstone of the new approach and suggest an alternative, softer, formulation of it. The conclusion of this discussion is that the new classical/real business cycle revolution marked a transition from a soft to a demanding understanding of the microfoundations requirement. In the second part of the paper, I present additional salient traits of the new classical and the real business cycle stages of the revolution. While each of these stages brought a specific contribution to the revolution, I emphasize the decisive role played by Kydland and Prescott in re-orienting the type of work in which macroeconomists were engaged. Finally, in part three, I ponder upon the causes of this revolution. After presenting and assessing PrescottÕs and LucasÕs accounts of the factors which gave rise to the new approach, I venture into muddier waters by raising the question of whether a political agenda underpinned the NC/RBC revolution.
    Date: 2009–08–01

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