Macroeconomic Frictions: What have we Learned from the Real Business Cycle Research Programm ?Jean-Pierre Danthine () and John B. DONALDSON Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP Abstract: One interpretation of the RBC research program is that it was meant to identify and incorporate into dynamic general equilibrium models those market imperfections which are most relevant for macroeconomic theory and policy. This paper reviews the methodological basis for this interpretation. It then discusses the empirical foundations for some of the many frictions that have found their way into RBC models including efficiency wages, labour contracts, nominal price rigidities, limited market participation, imperfect competition and expectational errors. We find that the 'necessity' of these frictions is better established in some cases than in others. While one is lead to the prediction that the 'next neo-classical synthesis' will be a dynamic stochastic general equilibrium with frictions, it is premature to decide which specific friction will necessarily be taken on board. Keywords: Business cycle; neo-classical synthesis; market frictions (search for similar items in EconPapers) Published in Advances in Macroeconomic Theory, J. Drèze (ed), IEA Conference volume No 133, Palgrave, 2001, pp. 56-75 Downloads: (external link) Related works: Access Statistics for this paper More papers in Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) from Université de Lausanne, Faculté des HEC, DEEP |
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