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This paper develops a theoretical example of a business cycle, that is, a model economy in which real output undergoes serially correlated movements about trend which are not explainable by movements in the availability of factors of production. The mechanism generating these movements involves unsystematic monetary-fiscal shocks, the effects of which are distributed through time due to information lags and an accelerator effect. Associated with these output movements are procyclical movements in prices, procyclical movements in the share of output devoted to investment, and, in a somewhat limited sense, procyclical movements in nominal rates of interest.

This paper is a theoretical study of rural‐urban migration—urbanization—as it has occurred in many low‐income economies in the postwar period. This process is viewed as a transfer of labor from a traditional, land‐intensive technology to a human capital–intensive technology with an unending potential for growth. The model emphasizes the role of cities as places in which new immigrants can accumulate the skills required by modern production technologies.

We analyze a model economy with many agents, each with a different productivity level. Agents divide their time between two activities: producing goods with the production-related knowledge they already have and interacting with others in search of new, productivity-increasing ideas. These choices jointly determine the economy’s current production level and its rate of learning and real growth. We construct the balanced growth path for this economy. We also study the allocation chosen by an idealized planner who takes into account and internalizes the external benefits of search. Finally, we provide three examples of alternative learning technologies and show that the properties of equilibrium allocations are quite sensitive to two of these variations.

This paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation. Sellers can change price only by incurring a real “menu cost.†We calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new U.S. data set of individual prices due to Klenow and Kryvtsov. The prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies. The model is also used to conduct numerical experiments on the economy’s response to various shocks. In none of the simulations we conducted did monetary shocks induce large or persistent real responses.