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- Can Real Equilibrium Models Account For The Fluctuations Of The UK Business Cycle?
Can real equilibrium models account for the fluctuations of the UK business cycle?
External Authors
Joseph Pearlman
Related Themes
Productivity, Trade, and Regional EconomiesPaper Category Number
128
The aim of this paper is to test if RBC models can reproduce the fluctuations observed in UK macroeconomic series. Four Equilibrium Business Cycle models will be studied: Hansen (1985), Christiano and Eichenbaum (1992), Burnside et al. (1993) and Fairise and Langot (1994). Following the approach of the Equilibrium Business Cycle Theory, this paper studies whether or not the simulated series from RBC models replicate the volatility, relative volatility, and correlation of UK macroeconomic series. Papers in the literature report only a few second order moments. The present paper presents a wider range of cross correlations of the series. The results highlight the strengths of some of the models, and point deficiencies yet to be corrected if RBC models are to be successful.
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