Tuning in RBC Growth Spectra

55 Pages Posted: 3 Jan 2017

See all articles by Szilard Benk

Szilard Benk

European Central Bank (ECB)

Tamas Csabafi

University of Missouri at Saint Louis

Jing Dang

SGCC, China

Max Gillman

Central European University (CEU) - Department of Economics

Michal Kejak

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: November 2016

Abstract

For US postwar data, the paper explains central consumption, labor, investment and output correlations and volatilities along with output growth persistence by including a human capital investment sector and a variable physical capital utilization rate. Strong internal "amplication" results from an economy-wide productivity shock across goods and human capital investment sectors that has variances 10,000 fold smaller than in the standard RBC TFP shock. Simulated moments are compared to data moments for the business cycle, the low frequency and the Medium Cycle frequency, as well as the high frequency. A metric is provided to gauge that the results have an average of 46% deviation of simulated moments from data moments, for a broad array of targets across all windows. Within this array, key correlations have only a 15% deviation in the business cycle window, and growth persistence only an 8% deviation in the low frequency, which indicates good "propagation". Counter cyclic human capital investment time and pro cyclic physical capital capacity utilization rates are also found as in data.

Keywords: Business cycles, United States, Economic growth, Human capital, Investment, Total factor productivity, Econometric models, Real Business cycles, amplification, growth persistence, Gali labor puzzle, data moments, human capital

JEL Classification: E13, E32, F10, O41

Suggested Citation

Benk, Szilard and Csabafi, Tamas and Dang, Jing and Gillman, Max and Kejak, Michal, Tuning in RBC Growth Spectra (November 2016). IMF Working Paper No. 16/215. Available at SSRN: https://ssrn.com/abstract=2892602

Szilard Benk (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Tamas Csabafi

University of Missouri at Saint Louis ( email )

1 University Blvd.
St Louis, MO 63121
United States

Jing Dang

SGCC, China ( email )

No. 86, West Chang'an Street
Xicheng District, Beijing City 100031
China

Max Gillman

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary
+36 1 327 3227 (Phone)
+36 1 327 3232 (Fax)

Michal Kejak

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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