A Critical Reflection on Real Business Cycle Models
In 1970s and 80s of the last century two macroeconomic frameworks developed in parallel: (i) the Real Business Cycles (RBC) theory and (ii) the New Keynesians framework. The RBC theory revolutionized the macroeconomic framework with a new methodology and theory around the aggregate output fluctuations: RBC models introduced the use of Dynamic Stochastic General Equilibrium (DSGE) models and postulated the impact of real shocks to explain the business cycle fluctuations. Almost thirty years later, Rebelo presented some of the challenges that faced the theoretical edifice built by Kydland and Prescott. The main goal of this critical review is to update the open questions in RBC models and discuss about the innovations around them in the last decade. This brief research concluded that the extensions (such as impatience and laziness shocks or distortionary taxes, for example) in the shocks beside technological and government provides relevant contributes to improves the model predictions concerning additional approximation to the stylized facts of business cycles.
Related Journals: History of Economics eJournal, Macroeconomics: Prices, Business Fluctuations, & Cycles eJournal, Econometric Modeling: Macroeconomics eJournal, Microeconomics: General Equilibrium & Disequilibrium Models eJournal.
(full article: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2908131)
Essays on the Determinants of the Financial Strength: An Application on the Credit Portfolio of an Oil & Gas Company
To manage and mitigate credit risk, financial institutions and large companies which grant credit use several models and techniques to evaluate the financial data of their client firms. The present empirical research updates the quantitative methods to score and model the financial strength of clients. To present how to evaluate and model a powerful algorithm that provides a financial strength of a client this research uses the credit portfolio of an Oil & Gas company with diversified upstream and downstream portfolios. The mentioned portfolio includes differentiated clients from several sub-portfolios, such as wholesale markets (bunkering, jet fuel, lubricants, oil distribution or chemicals) and the retail markets (oil stations and fuel cards). This research should help companies’ Chief Risk Officers (CRO) and commercial departments to evaluate the individual credit risk analysis and the credit portfolio as a whole. The results presented are validated by micro-econometric techniques. It is also important to note that the achieved outcomes were validated by expert judgments using the financial strength method to filter out poor risk firms and individuals.
Related Journals: Corporate Finance: Capital Structure & Payout Policies eJournal, Econometric Modeling: Microeconometric Models of Firm Behavior eJournal, Econometric Modeling: Capital Markets - Risk eJournal.
(full article: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2908149)