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The Econometrics of the General Equilibrium Approach to Business Cycles

Staff Report 130 | Published November 1, 1990

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The Econometrics of the General Equilibrium Approach to Business Cycles

Abstract

The founding fathers of the Econometric Society defined econometrics to be quantitative economic theory. A vision of theirs was the use of econometrics to provide quantitative answers to business cycle questions. The realization of this dream required a number of advances in pure theory—in particular, the development of modern general equilibrium theory. The econometric problem is how to use these tools along with measurement to answer business cycles questions. In this essay, we review this econometric development and contrast it with the econometric approach that preceded it.


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