Business Cycle Models with Financial Market frictions
Outline:
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Modern Business Cycle Model with Search Friction
The big picture in this model is that markets do not clear instantaneously to make everyone happy. There are frictions in the labour market. This Diamond, Pissarides model has real unemployment. In RBC models we witness that unemployment is voluntary in nature.
Keynesian and Monetarists business cycle models and the Investment Savings Liquidity preference Money supply curves
According to the Keynes theory, the source of fluctuations in the aggregate demand.
Business Cycles and the RBC model
T his plot of log Real GNP shows the growth of real GNP in time. What we see is that the GNP has grown smoothly and consistently on average (red line) however, with some fluctuations (blue line).