Theory-Based Models
Theory-Based Models
Theory-Based Models
A stripped-down real business cycle setup linking productivity, capital accumulation, and intertemporal return conditions.
Theory-Based Models
A simplified RBC route that foregrounds productivity, Euler-style return conditions, and capital adjustment without full DSGE machinery.
Variables
Productive capital stock.
Output produced from capital and technology.
Output net of replacement investment.
Assumptions
The simplified RBC route ignores nominal rigidities.
Everything runs through real productivity and capital adjustment.
A representative-agent intertemporal condition anchors the steady-state return.
The route keeps the Euler logic but not a full DSGE solution stack.
Parameters
Technology scale in production.
Curvature of production.
Intertemporal patience.
Capital wear between periods.
Persistence of the productivity shock component.
Starting capital stock for the transition path.
Current deviation from trend productivity.
Shock presets
Raises current productivity above trend.
Raises the discount factor and supports more capital.