Chapter 7Production, Growth and Business Cycles I. The Basic Neoclassical Model
Journal of Monetary Economics 21(2), March 1988, pp. 195-232.
University of Rochester, Rochester, NY 14627, USA
Received September 1987, final version received December 1987
This paper presents the neoclassical model of capital accumulation augmented by choice of labor supply as the basic framework of modem real business cycle analysis. Preferences and production possibilities are restricted so that the economy displays steady state growth. Then we explore the implications of the basic model for perfect foresight capital accumulation and for economic fluctuations initiated by impulses to technology. We argue ...
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