Time to Build and Aggregate Fluctuations
Quick Summary
The work of Finn E. Kydland and Edward C. Prescott, particularly their 1982 paper "Time to Build and Aggregate Fluctuations", is a foundational contribution to dynamic macroeconomics. They developed real-business-cycle (RBC) models, which explain economic fluctuations as a result of external and internal shocks.123
A key finding is that changes in technology or supply shocks, such as oil price increases, can impact investment and relative prices, leading to short-term fluctuations around the long-term economic growth path. This work established a microeconomic foundation for business cycle analysis and influenced government policies and central bank independence.123
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- Finn E. Kydland
In “Time to Build and Aggregate Fluctuations” (1982), the pair demonstrated that technology changes or supply shocks, such as oil price hikes, could be reflected in investment and relative price movements and thereby create short-term fluctuations around the long-term economic growth path.
Read MoreIn “Time to Build and Aggregate Fluctuations” (1982), the pair demonstrated that technology changes or supply shocks, such as oil price hikes, could be reflected in investment and relative price movements and thereby create short-term fluctuations around the long-term economic growth path.
Read More - Edward C. Prescott
In “Time to Build and Aggregate Fluctuations” (1982), the two economists established the microeconomic foundation for business cycle analyses, demonstrating that technology changes or supply shocks, such as oil price hikes, could be reflected in investment and relative price movements and thereby create short-term fluctuations around…
Read MoreIn “Time to Build and Aggregate Fluctuations” (1982), the two economists established the microeconomic foundation for business cycle analyses, demonstrating that technology changes or supply shocks, such as oil price hikes, could be reflected in investment and relative price movements and thereby create short-term fluctuations around…
Read More