Demand Disturbances and Aggregate Fluctuations: The Implications of Near Rationality

Stephen Jones (jonessrg@mcmaster.ca) and James Stock

Economic Journal, 1987, vol. 97, issue 385, 49-64

Abstract: The paper investigates some properties of "near rational" models of the cycle, examining two types of framework. In the first, an otherwise classical, competitive economy is shown to respond to demand disturbances when some firms follow a near rational hiring policy. In the second model, a dynamic setting is addressed and a criterion termed "stochastic near rationality" is employed. Simulation results are consistent with recent empirical findings and suggest that further quantitative evaluation is merited. Copyright 1987 by Royal Economic Society.

Date: 1987
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