Rotemberg & Woodford (1995)

Dynamic General Equilibrium Models

Models that study how economic variables evolve over time under the influence of different shocks and competitive conditions.

Imperfect Competition

A market structure where some firms have market power, allowing them to set prices higher than marginal costs.

Neoclassical Growth Model

An economic model that explains long-term economic growth based on production functions, capital accumulation, and labor.

Monopolistic Competition

A type of imperfect competition where many firms sell products that are similar but not identical, allowing them to set their own prices.

Solow Residual

A measure of productivity in an economy, calculated as output minus the contributions of labor and capital.

Technology Shocks

Unexpected changes in technological levels that affect production efficiency and output.

Increasing Returns to Scale

A situation in which an increase in the inputs used in production leads to a proportionally larger increase in output.

Markup

The difference between the selling price of a product and its production cost, expressed as a percentage of the cost.

Labor Demand

The total quantity of labor that firms are willing and able to hire at a given wage rate.

Customer Market Model

A model of market behavior emphasizing the dynamic patterns of customer demand and firm pricing decisions.

Implicit Collusion Model

A model where firms tacitly coordinate their pricing rather than explicitly agreeing to set prices together.

Equilibrium Fluctuations

Variations in economic activity levels that can occur even in the absence of shocks due to expectations and market powers.

Euler Equation

An equation used in economics that describes the intertemporal consumption choices of consumers.

Empirical Evidence

Information gathered through observation and experimentation that provides support for or against a given theory.

Self-Fulfilling Expectations

Situations where beliefs about future events influence actions that bring about the expected outcome.

Business Cycle

Fluctuations in economic activity characterized by periods of expansion and contraction in the economy.

Endogenous Markup

A situation where the markup varies according to factors like demand and market conditions rather than being constant.

Price Rigidity

The tendency for prices to remain unchanged despite changes in supply and demand.

Aggregate Activity

The total economic activity in an economy, represented through measures like GDP.

Demand Spillovers

The phenomenon where increased demand in one sector or firm leads to increased demand in another sector or firm.

Monetary Policy Shock

Unexpected changes in monetary policy that can impact economic activity and the business cycle.