Real Business Cycle

Macro

一些小问题，比如，如何理解 Real Business Cycle 中的 Steady State?

Limitations

The Real Business Cycle has its own limitations. First, RBC models present microfounded theories of the business cycle. But:

1. Unclear what ‘productivity shocks’ represent
2. Underestimate volatility of employment, require high Frish elasticity
3. No role for involuntary unemployment, little endog. propagation
4. Price level does not matter: no analysis of inflation
5. No role for, e.g., monetary policy

Thus we need to introduce New Keynesian Model