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The Evolution of Endogenous Business Cycles

Roger Farmer ()

No 9080, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper distinguishes between two kinds of Endogenous Business Cycle models, and discusses the evolution from first generation EBC1 models to second generation EBC2 models. I argue that EBC1 models, which display dynamic indeterminacy, are part of the evolution of modern macroeconomics that has classical roots dating back to the 1920s. EBC2 models, which display steady-state indeterminacy, are a more radical departure from the classical Real Business Cycle model; they represent a return to one of the most important ideas to emerge from Keynes’ (1936) General Theory; that high involuntary unemployment can persist as part of the steady-state equilibrium of a market economy.

Keywords: indeterminacy; self-fulfilling propcheices; sunspots; unemployment (search for similar items in EconPapers)
JEL-codes: B22 E20 E32 (search for similar items in EconPapers)
Date: 2012-08
New Economics Papers: this item is included in nep-hpe and nep-mac
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Related works:
Journal Article: THE EVOLUTION OF ENDOGENOUS BUSINESS CYCLES (2016) Downloads
Working Paper: The Evolution of Endogenous Business Cycles (2012) Downloads
Working Paper: The Evolution of Endogenous Business Cycles (2012) Downloads
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