ECN 506 Study Guide - Fall 2018, Comprehensive Midterm Notes - Macroeconomics, Shimer College, Ryerson University
ECN 506
MIDTERM EXAM
STUDY GUIDE
Fall 2018
Introduction Model Results Conclusion
EF9922: Macroeconomics Andolfatto (1996)
Ryerson University
February 27, 2018
Introduction
Introduction
Model Results Conclusion
incorporating labour-market search in a real business cycle model
• some quantitative improvements:!- hours fluctuate substantially
more than wages!- contemporaneous correlation between hours and
productivity
falls!- output displays positive autocorrelation
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labour-market search frictions introduces an additional propagation
mechanism to a real business cycle model
Introduction
Introduction
Model Results Conclusion
propagation mechanism
• consider changes to the expected returns to search !- changes in
labour productivity - some other structural shock !
• equilibrium search and recruiting activities respond !
• effects are propagated through time via changes in the stock !of
employment !
• recall that the absence of a significant internal propagation
mechanism is one of the big criticisms of RBC models (see
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Document Summary
Model results conclusion: theory:!- integrate the dmp search and matching model of the labour market into an otherwise standard rbc model (i. e. , kydland and. Simulate time paths for the economic variables of interest!- compare the statistical properties of the simulated time series to the data. Planner"s problem!a decentralized search economy unit measure of ex ante identical households: preferences: ! !e0. T [u(ct)+ (t)h(1 xt)] t=0 : ct is consumption, and xt is the fraction of time on non-leisure activities , u and h are increasing and concave , parameter (t) > 0 depends on the household"s employment ! status: 2 otherwise: the parameter reflects differences in the efficiency of a household"s home production . Planner"s problem!a decentralized search economy: (0, 1) is the exogenous separation rate employment evolves according to nt+1 =(1 )nt +m(vt,(1 nt)e)! recruiting and screening: each new job incurs a flow cost.