Features
- Cover Type: Hard Cover with 448 pages
- Published by: Harvard University Press March 31, 2008
- Written in: English
- ISBN 10 Number: 0674028147
- ISBN 13 Number: 978-0674028142
-
Book Dimensions:
9.2 x 6.4 x 1.4 inches
- Weighs: 1.8 pounds
Product Review
The ABCs of RBCs fills an important gap in the textbook literature in modern macroeconomics. It presents, in a self-contained, agile fashion, a variety of dynamic macroeconomic models that are currently used to understand business cycles in developed as well as developing countries.
--Martin Uribe,
Duke UniversityThe ABCs of RBCs is a focused text that does exactly what it sets out to do, which is to explain the current techniques for the analysis of real business cycle models. A highly useful primer.
--Kim Border, California Institute of Technology
Product Description
The ABCs of RBCs is the first book to provide a basic introduction to Real Business Cycle (RBC) and New-Keynesian models. These models argue that random shocks—new inventions, droughts, and wars, in the case of pure RBC models, and monetary and fiscal policy and international investor risk aversion, in more open interpretations—can trigger booms and recessions and can account for much of observed output volatility.
George McCandless works through a sequence of these Real Business Cycle and New-Keynesian dynamic stochastic general equilibrium models in fine detail, showing how to solve them, and how to add important extensions to the basic model, such as money, price and wage rigidities, financial markets, and an open economy. The impulse response functions of each new model show how the added feature changes the dynamics.
The ABCs of RBCs is designed to teach the economic practitioner or student how to build simple RBC models. Matlab code for solving many of the models is provided, and careful readers should be able to construct, solve, and use their own models.
In the tradition of the “freshwater” economic schools of Chicago and Minnesota, McCandless enhances the methods and sophistication of current macroeconomic modeling.
Reader ReviewsContrary to the (potentially) misleading title, this is a graduate-level text, without any doubt. Its ambitious goal is to introduce readers to the theory *and practice* of dynamic, stochastic, general equilibrium macroeconomics. McCandless takes a series of models, increasing in complexity (from the neoclassical growth model to a small, open economy version of the baseline staggered prices model) and solves for the steady state and the transitional dynamics of the associated log-linear model. Eventually, you're given the matrixes required by Uhlig's toolkit. (You're ready to take the model to the computer and do impulse response functions and simulate moments.) This book is not a self-contained treatment. You'll need a fair grasp of microeconomics, a regular textbook to understand the macroeconomic theory basics (Romer's?), another text for dynamic programming and related numerical methods and something for Matlab, if needed. The "RBCs" part is also misleading. True, it features Hansen's 1985 models, but the author also lumps together under this label models that, traditionally, are called "New Keynesian". This makes perfect sense to me: his rejection of old, divisive and counterproductive labeling is refreshing. He also seems completely disinterested in the "old macroeconomics" and its relation to the "new" literature. (cf. Gali) I gave this book 4/5 stars because there's far too little hand-holding in it, for a book containing "ABCs" in its title. If you're looking for "ABCs", start with Romer. A better title would have been "The ABCs of Taking DSGE Models to the Computer". Also, the chapters on (stochastic) dynamic programming are short and somewhat superficial. Most readers will need something dedicated.
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