<p>Business cycle fluctuations can be studied in many ways including also growth models. An example of using growth model to study business cycle would be this <a href="https://link.springer.com/article/10.1007/BF01213939" rel="nofollow noreferrer">1995 paper by Cho &amp; Cooley</a>. This being said growth models are not as common for examining business cycles as for example DSGE models so saying they are usually used for that purpose is correct. To my best knowledge no statistics on the relative use of this or that model for explaining business cycles exist but anecdotally, speaking from attending macro conferences, DSGE or various non-stochastic (when we talk about pure theory) New Keynesian or to lesser extent real business cycle models remain popular.</p>

CC BY-SA 4.0
2020-07-22T15:11:25.793Z
Thanks for you answer. Yeah I am a bit confused, because indeed in papers I read, they talk about BC (business cycles) both in DSGE as in OLG frameworks. However I wonder if the definition of a cycle is the same in both approaches, as OLG typically looks at long term changes, rather than variations along those long term developments. E.g. a Boone and Quaghebeur 2018 paper, versus e.g. their Quaghebeur 2019 paper.

2018 Beyond rational expectations: The effects of heuristic switching in an Overlapping Generations model.

2019. Expectations and the Macroeconomic Dynamics of Fiscal Policy.
Beck Batucada
CC BY-SA 4.0
2020-07-22T15:14:00.087Z
Gasteiger and Zhang (2014) is another example of a ramsey growth model approach
Beck Batucada
CC BY-SA 4.0
2020-07-22T15:14:35.710Z
I just wonder why in some cases they choose a growth model, and in other cases a DSGE NK model
Beck Batucada
CC BY-SA 4.0
2020-07-22T19:31:43.223Z
@BeckBatucada I don’t think there are some simple clear cut rules where to use which model. This requires some soft skills as you can often modify/mold a model in various ways. I agree that OLG is probably suited more for some examination of business cycles from long term perspective but you can make a multiperiod versions of New Keynesian models as well.
1muflon1
CC BY-SA 4.0
2020-07-21T16:26:14.077Z
2020-07-21T17:39:49.993Z
2020-07-21T17:39:49.993Z
1muflon1
<p>I wonder if business cycle fluctuations are usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?</p>

<economic-growth><dsge><solow><business-cycles><ramsey>
Are business cycle fluctuations usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?
Beck Batucada
# Are business cycle fluctuations usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?

(Asked by: username_0 on 2020-07-21)

I wonder if business cycle fluctuations are usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?

**Tags:** economic-growth, dsge, solow, business-cycles, ramsey


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## 1 answers

### Answer by username_1 on 2020-07-21. Score: 2 | Accepted answer

Business cycle fluctuations can be studied in many ways including also growth models. An example of using growth model to study business cycle would be this [1995 paper by Cho & Cooley](https://link.springer.com/article/10.1007/BF01213939). This being said growth models are not as common for examining business cycles as for example DSGE models so saying they are usually used for that purpose is correct. To my best knowledge no statistics on the relative use of this or that model for explaining business cycles exist but anecdotally, speaking from attending macro conferences, DSGE or various non-stochastic (when we talk about pure theory) New Keynesian or to lesser extent real business cycle models remain popular.

> **Comments:**
> **username_0**: Thanks for you answer. Yeah I am a bit confused, because indeed in papers I read, they talk about BC (business cycles) both in DSGE as in OLG frameworks. However I wonder if the definition of a cycle is the same in both approaches, as OLG typically looks at long term changes, rather than variations along those long term developments. E.g. a Boone and Quaghebeur 2018 paper, versus e.g. their Quaghebeur 2019 paper.  2018 Beyond rational expectations: The effects of heuristic switching in an Overlapping Generations model.  2019. Expectations and the Macroeconomic Dynamics of Fiscal Policy.  
> **username_0**: Gasteiger and Zhang (2014) is another example of a ramsey growth model approach  
> **username_0**: I just wonder why in some cases they choose a growth model, and in other cases a DSGE NK model  
> **username_1**: @username_0 I don’t think there are some simple clear cut rules where to use which model. This requires some soft skills as you can often modify/mold a model in various ways. I agree that OLG is probably suited more for some examination of business cycles from long term perspective but you can make a multiperiod versions of New Keynesian models as well.  

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