This introduction to modern business cycle theory uses a neoclassical growth framework to study the economic fluctuations associated with the business cycle. Presenting advances in dynamic economic theory and computational methods, it applies concepts to t

Labor Markets and Business Cycles integrates search and matching theory with the neoclassical growth model to better understand labor market outcomes. Robert Shimer shows analytically and quantitatively that rigid wages are important for explaining the volatile behavior of the unemployment rate in business cycles. The book focuses on the labor wedge that arises when the marginal rate of substitution between consumption and leisure does not equal the marginal product of labor. According to competitive models of the labor market, the labor wedge should be constant and equal to the labor income tax rate. But in U.S. data, the wedge is strongly countercyclical, making it seem as if recessions are periods when workers are dissuaded from working and firms are dissuaded from hiring because of an increase in the labor income tax rate. When job searches are time consuming and wages are flexible, search frictions--the cost of a job search--act like labor adjustment costs, further exacerbating inconsistencies between the competitive model and data. The book shows that wage rigidities can reconcile the search model with the data, providing a quantitatively more accurate depiction of labor markets, consumption, and investment dynamics. Developing detailed search and matching models, Labor Markets and Business Cycles will be the main reference for those interested in the intersection of labor market dynamics and business cycle research.

Providing an analysis of the Tibet question, this work explores essential themes and issues concerning modern Tibet. It considers such topics as representations and sovereignty, economic development and political conditions, the exile movement and human rights, historical legacies and international politics, identity issues and the local society.

Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.

This study is a revised version of my doctoral dissertation at the Economics Department of the University of Munich. I want to take the opportunity to express my gratitude to some people who have helped me in my work. My greatest thanks go to the supervisor of this dissertation, Professor Claude Billinger. Bis ideas have formed the basis of my work. Be permanently sup ported it with a host of ideas, criticism and encouragement. Furthermore, he provided a stimulating research environment at SEMECON. This study would not have been possible in this form without the help of my present and former colleagues at SEMECON. I am indebted to Rudolf Kohne-Volland, Monika Sebold-Bender and Ulrich Woitek for providing soft ware and guidance for the data analysis. Discussions with them and with Thilo Weser have helped me to take many hurdles, particularly in the early stages of the project. My sincere thanks go to them all. I had the opportunity to present a former version of my growth model at a workshop of Professor Klaus Zimmermann. I want to thank all the parti cipants for their helpful comments. I also acknowledge critical and constructive comments from an anonymous referee. Table of Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Part I. Methodology 1. Importance of Stylized Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.1 Limitations of statistical testing. . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.2 Evaluating economic models. . . . . . . . . . . . . . . . . . .. . . . 11 . . . . . . 2. Further Methodological Issues . . . . . . . . . . . . . . . . . .. . . . 13 . . . . . .

As the 55th anniversary of the bank holiday of March 1933 approached, financial instability was a main topic in the financial press. Daily reports appeared of international debt crises, of the covert bankruptcy of deposit insurance, and of the near bankruptcy of one great financial institution after another. The great stock market crash of October 19 and 20, 1987, demonstrated that extreme instability can happen. It is generally asserted that the consequences of October 19th and 20th would have been disastrous if the Federal Reserve and Treasury interventions had not set things right. In 1933, financial markets in the United States and throughout the capitalist world collapsed. In the light of historical experience, the past 55 years are the anomaly. The papers collected in this volume come from various backgrounds and research paradigms. A common theme runs through these papers that makes the collection both interesting and important: The authors take seriously the obvious evidence that capitalist economies progress through time by lurching. Whether a particular study starts from household utility maximization or from the processes by which productive structures are reproduced and expanded, the authors are united in accepting the evidence that financial instability is a significant characteristic of modern capitalism.

This paper studies the macroeconomic effect and underlying firm-level transmission channels of a reduction in business entry costs. We provide novel evidence on the response of firms' entry, exit, and employment decisions. To do so, we use as a natural experiment a reform in Portugal that reduced entry time and costs. Using the staggered implementation of the policy across the Portuguese municipalities, we find that the reform increased local entry and employment by, respectively, 25% and 4.8% per year in its first four years of implementation. Moreover, around 60% of the increase in employment came from incumbent firms expanding their size, with most of the rise occurring among the most productive firms. Standard models of firm dynamics, which assume a constant elasticity of substitution, are inconsistent with the expansionary and heterogeneous response across incumbent firms. We show that in a model with heterogeneous firms and variable markups the most productive firms face a lower demand elasticity and expand their employment in response to increased entry.