Business Cycle: Theory and Empirical Applications Country of Interest: Netherlands

In: Business and Management

Submitted By yisdong
Words 3420
Pages 14
University of Frankfurt am Main

Bachelor Seminar Business Cycle: Theory and Empirical Applications Country of interest: Netherlands Teacher: Prof. Ctirad Slavik Summer Semester 2013

Yisong Dong Student ID: 3903447 June 17.2013

Contents 1. Introduction……………………………………………………………………3 2. Data Work………………………...…………………………………………...3 2.1 2.2 2.3 2.4 2.5 Data……………………………………………………………………3 Detrending the data with Hodrick-Prescott Filter………………..……4 Basic Statistics for the detrended data………………………………...7 Construct the Solow residual without labor……………………...…..11 Construct the Solow residual with labor…………….………………12

3. Calibrating and simulating a simple stochastic RBC model…………………13 3.1 3.2 Two procedure for calibrating θ and calculating the I/K, K/Y and I/Y ratios……….…………………………………………………………13 Stimulation…………………………………………………………...16

4. Conclusion……………………………………………….………………...…21 References………………………………………………………………………..22

2

1.

Introduction

Business cycle refers to economy-wide fluctuations in production, trade and economic activity in general over several months or years in an economy organized on freeenterprise principles.1 It has been a well-documented feature of economic life for two centuries or more. Business cycle is the upward and downward movements of levels of GDP2 and refers to the period of expansions and contractions in the level of economic activities (business fluctuations) around its long-term growth trend.3 These fluctuations occur around a long-term growth trend, and typically involve shifts over time between periods of relatively rapid economic growth (an expansion or boom), and periods of relative stagnation or decline (a contraction or recession). They are usually measured by considering the growth rate of real gross domestic product. Despite being termed cycles, these fluctuations in economic activity can prove…...

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