Harding, Don and Negara, Siwage (2008): Estimating baseline real business cycle models of the Australian economy.
Download (213kB) | Preview
This paper is concerned with the issues that arise in building a small Dynamic Stochastic General Equilibrium (DSGE) model of the Australian economy. Our ultimate objective is to build a model that can be used to study long run economic growth and the business cycle. We agree with Cooley and Prescot�s (1995) view that these are phenomena to be studied jointly rather than separately. Adopting this view has several implications for what constitutes the essential components of our a model. We see these as being: a major role for a persistent technology shock in driving economic activity; and consistency with a version of the Ramsey-Cass-Koopmans (RCK) exogenous growth model. Without the former it is not possible to generate realistic business cycle features; demand shocks alone are insuffcient see Harding and Pagan (2007). The RCK exogenous growth model remains the simplest model available to encompass the salient features of economic growth which is why we rate it as essential. We also take the methodological stance that it is desirable to obtain a satisfactory baseline model before adding other desirable features such as: money; openness to international trade, capital flows, and immigration; and price and wage stickiness. In short we see small real business cycle (RBC) models as the natural starting point for our work.
|Item Type:||MPRA Paper|
|Original Title:||Estimating baseline real business cycle models of the Australian economy|
|Keywords:||Real business cycle; stochastic growth model; technology shock; persistence|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles
C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection
|Depositing User:||Don Harding|
|Date Deposited:||20. Sep 2011 15:25|
|Last Modified:||01. Jan 2016 01:49|
Altonji, J.G., 1986. Intertemporal substitution in labor supply: Evidence from micro data, Journal of Political Economy 94(3), S176-S215.
Altug, S., 1989. Time to build and aggregate �uctuations: some new evidence. International Economic Review 30, 883-920.
Basdevant, O., N. Björksten, and O. Karagedikli (2004), �Estimating a time varying neutral real interest rate for New Zealand,Discussion Paper Series 2004/01, Reserve Bank of New Zealand.
Benhabib, J., Rogerson, R., Wright, R. D., 1991. Homework in macroeconomics: Household production and aggregate �uctuations. Journal of Political Economy 99 (6), 1166-1187.
Burnside, C., Eichenbaum, M., Rebelo, S., 1993. Labor hoarding and the business cycle. Journal of Political Economy 101 (2), 245-273.
Burnside, C., Eichenbaum, M., 1996. Factor hoarding and the propagation of business-cycle shocks. American Economic Review 86 (5), 1154-1174.
Caselli, Francesco and James Feyrer. 2007. "The Marginal Product of Capital." Quarterly  Journal of Economics, 122:2, pp. 535-68.
Christiano, L. J., Eichenbaum, M., 1992. Current real-business-cycle theories and aggregate labor-market fluctuations. American Economic Review 82 (3), 430-450.
Fuentes, R., and F. Gredig, 2007. Estimating the Chilean Natural Rate of Interest, Central Bank of Chile.
Hansen, G. D., 1985. Indivisible labor and the business cycle. Journal of Monetary Economics 16, 309-327.
Hansen, G.D., E.C. Prescott. Malthus to Solow. The American Economic Review, Vol. 92, No. 4. (Sep., 2002), pp. 1205-1217.
Harding, D, 2002. "Notes on neglected seasonality in the Australian national accounts," MPRA Paper 3699, University Library of Munich, Germany.
Harding, D., Pagan, A. R., 2000. Knowing the cycle. In: Backhouse, R., Salanti, A., (Eds), 2000. Macroeconomics in the real world, Oxford University Press, 23-41.
Harding, D., Pagan, A., 2002. Dissecting the cycle: A methodological investigation. Journal of Monetary Economics 49, 365-381.
Ireland, P. N., 2004. A method for taking models to the data. Journal of Economic Dynamics and Control 28, 1205-1226.
King, R. G., Plosser, C. I., Rebelo, S. T., 1988a. Production, growth and business cycles I. The basic neoclassical model. Journal of Monetary Economics 21, 195-232.
Melecky, M., Buncic, D., 2005. An estimated, New Keynesian policy model for Australia. Mimeo. University of New South Wales. Available online at http://184.108.40.206/eps/mac/papers/0511/0511026.pdf.
Nimark, K., 2007. A structural model of Australia as a small open economy. Reserve Bank of Australia, Research Discussion Paper 2007-01. Available online at http://www.rba.gov.au/rdp/RDP2007-01.pdf.
Ruge-Murcia, F. J., 2003. Methods to estimate dynamic stochastic general equilibrium models. Department de sciences economicques and C.I.R.E.Q., Universite de Montreal.
Summers, P. M., 1998. Are Australian business cycles 'real'? Mimeo. University of Melbourne.