The New Classical Theory and the Real Business Cycle Model
The New Classical Theory and the Real Business Cycle Model

Summary/Abstract: The present paper aims at describing some key elements of the new classical theory related model, namely the Real Business Cycle, mainly describing the economy from the perspective of a perfectly competitive market, characterised by price, wage and interest rate flexibility. The rendered impulse-response functions, that help us in revealing the capacity of the model variables to return to their steady state under the impact of a structural shock, be it technology or monetary policy oriented, give points to the neutrality of the monetary entity decisions, therefore confirming the well-known classical dichotomy existing between the nominal and the real factors of the economy.

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