Simulating a Simple Real Business Cycle Model using Excel

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zˆ= ρzˆ+ zε,101ˆˆ a ˆ21c0+ a22k0+ a23zˆ0k1=,b22enter=$B$7*C30+$D$7*B31|in cell C31, and=($B$17*G30+$B$18*D30+$B$19*C30)/$B$20in cell D31.Step 8. Copy the cells A31–F31 into subsequent rows. Thenwe obtain a simulated time series of z 1 , ˆk 1 , ĉ 1 , and ˆl 1 .Figure 3Figure 4Figure 5Leti ≡ ktt+1y ≡ c + i ,t− (1 − δ ) k ,i ≡ k − (1 − δ ) k = δk,y ≡ c + k − (1 − δ ) k = c + δk,y ˆ ˆˆt− y cct+ kkt+1− (1 − δ ) kktyˆt≡ =,yyˆ (1 ) ˆˆit− i kkt+ 1− − δ kktit≡ =,iiα −11−α( ˆ )( ˆ α −1) ( ˆ 1−αrt≡ αztktlt− δ = α zzt+ z kkt+ k llt+ l)− δ ,α −αw ≡ (1 − ) z k l = (1 − )( zzˆ+ z)(kkˆα+ k)( llˆ−ααα+ l),tttttttα −αw ≡ (1 − α)zk l ,(1 )( zzˆz)(kkˆαw wk)( llˆ−t− −αt+t+t+ l)wˆt≡ =wwt− w.By considering these variables together with z 1 , ˆk 1 , ĉ 1 , andˆl 1 , one can create a table and a figure (Figures 6 and 7)similar to Table 3 and Figure 10 of King and Rebelo (1999). 1tαtFigure 6CHEER Volume 19 Page 19
Notes1 Sample Excel files are available athttp://member.social.tsukuba.ac.jp/hokari/ReferencesFarmer, R.E.A. (1999) Macroeconomics of Self-fulfillingProphecies,2nd ed, MIT Press.King, R.G., and S.T. Rebelo (1999) ‘Resuscitating real businesscycles’ in Handbook of Macroeconomics, volume 1B, by J.B.Taylor and M. Woodford (Eds), Elsevier, 927–1007.Kydland, F. and E. Prescott (1982) ‘Time to build and aggregatefluctuations’, Econometrica 50, 1345–1371.Long, Jr., J.B. and C.I. Plosser (1983) ‘Real business cycles’,Journal of Political Economy 91, 39–69.Strulik, H. (2004) ‘Solving rational expectations models usingExcel’, Journal of Economic Education 35, 269–283.Contact detailsToru HokariAssociate ProfessorGraduate School of Humanities and Social SciencesUniversity of TsukubaFigure 71-1-1 Ten’nodaiTsukubaIbaraki, 305-8571JapanEmail: hokari@social.tsukuba.ac.jpFax: +81-298-53-6611Page 20 CHEER Volume 19
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Simulating a Simple Real Business Cycle Model using Excel

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