Please enable JavaScript.

Coggle requires JavaScript to display documents.

Plosser 1989 (RBC (Neoclassical model of capital accumulation (More…

- - - - in the absence of productivity disturbances converge to constant or steady state value
        
        more investment in capital for more future ouput to even consumption
        
        affect on work ambiguous
        
        Current productivity is temporarily high which encourages intertemporal substitution of current for future work and intertemporal substitution of current consumption for leisure.
        
        Wealth, on the other hand, is higher and that acts to reduce current and future work effort.
        
        temporary shock is propagated forward and the effects of the shock show up in higher output, consumption and leisure in the future.
        
        greater consumption
    - - more persistent increase in productivity would tend to raise wealth more significantly by raising future output.
      - incentive to increase investment would plausibly be reduced and his incentive to increase current consumption would be increased. There would also be less incentive to work harder today because the wealth effect is stronger and the intertemporal substitution effect is reduced
  - - - can handle uncertainty
- - - - Monetary policy
      - Excessive: inflation
      - Fiscal Policy
      - Insufficient: unemployment
- - - - and thus alter the behavioral relations exploited by empirical implementations of the Keynesian analysis.