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Real Business Cycles in a Keynesian Macro Model

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  • Naish, Howard F

Abstract

Imperfectly competitive Keynesian macro models provide a simple, plausible account of real business cycles. These cycles are the result of rule-of-thumb pricing policies followed by firms, rather than a by-product of intertemporal optimization by a representative, rational consumer. Three rules are considered: a mark-up rule; a price leadership rule; and a rule based on adaptive expectations. In each case, random productivity shocks lead to cyclical movements in output and employment. Simulations indicate that the losses associated with each rule are often trivially small. If rational expectations imply some information costs, simple pricing rules may be almost optimal. Copyright 1993 by Royal Economic Society.

Suggested Citation

  • Naish, Howard F, 1993. "Real Business Cycles in a Keynesian Macro Model," Oxford Economic Papers, Oxford University Press, vol. 45(4), pages 618-638, October.
    • Handle: RePEc:oup:oxecpp:v:45:y:1993:i:4:p:618-38
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    Cited by:

    1. João Paulo Martin Faleiros & Denisard Cnéio de Oliveira Alves, 2006. "Não Linearidade Nos Ciclos De Negócios: Modelo Auto-Regressivo “Smooth Transition” Para O Índice Geral De Produção Industrial Brasileiro E Bens De Capital," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 10, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    2. Naish, Howard F., 1998. "The linear quadratic inventory model as a micro foundation for Keynesian theories of the business cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 39-57, July.
    3. Naish, Howard F., 1995. "Keynesian real business cycles in a neoclassical framework," Journal of Economic Behavior & Organization, Elsevier, vol. 27(2), pages 183-211, July.
    4. Carlos Borondo, 1994. "La rigidez nominal de los precios de la Nueva Economía Keynesiana: una panorámica," Investigaciones Economicas, Fundación SEPI, vol. 18(2), pages 245-288, May.

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