THE EVOLUTION OF ENDOGENOUS BUSINESS CYCLES

Roger Farmer

Macroeconomic Dynamics, 2016, vol. 20, issue 2, 544-557

Abstract: This paper distinguishes two kinds of endogenous business cycle models: EBC1 models, which display dynamic indeterminacy, and EBC2 models, which display steady-state indeterminacy. Both strands of the literature have their origins in the sunspot literature that developed at the University of Pennsylvania in the 1980s. I argue that EBC1 models are part of the evolution of modern macroeconomics that has classical roots dating back to the 1920s. EBC2 models provide a microfoundation for one of the most important ideas to emerge from Keynes's (1936) General Theory of Employment, Interest and Money: that high involuntary unemployment can persist as part of the steady-state equilibrium of a market economy.

Date: 2016
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Related works:
Working Paper: The Evolution of Endogenous Business Cycles (2012)
Working Paper: The Evolution of Endogenous Business Cycles (2012)
Working Paper: The Evolution of Endogenous Business Cycles (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:20:y:2016:i:02:p:544-557_00

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