Nonstationary Shocks, Crises and Policy
Posted: 4 Aug 2012
Date Written: August 1, 2012
A Real Business Cycle model of the UK is developed to account for the behaviour of UK nonstationary macro data. The model, when tested by the method of indirect inference, can explain the behaviour of main variables (GDP, real exchange rate, real interest rate). We use it to explain how 'crisis' and 'euphoria' are endemic in capitalist behaviour due to nonstationarity; and we draw some policy lessons.
Keywords: Banking Crisis, Banking Regulation, Bootstrap, Indirect Inference, Nonstationarity, Productivity, Real Business Cycle
JEL Classification: E32, F31, F41
Suggested Citation: Suggested Citation