Introduction

This chapter constitutes an introduction to the book whose purpose is to illustrate the objectives and method pursued by the author. The main objective is to provide a guide to the methods and theories that have characterized, and contributed to, the development of modern macroeconomics around the Stochastic Dynamic Models of Real Business Cycle. As regards the methodological aspect, the mathematical tools that the theory has developed for the representation and solution of dynamic systems are presented on the one hand, especially the Blanchard-Kahn procedure, and on the other the tools for solving problems intertemporal models, then applied to Real Business Cycle models. Particular emphasis is placed on a distinction between Dynamic General Equilibrium models (DGE) and Dynamic Stochastic General Equilibrium models (DSGE), which is compared to the distinction between classical Newtonian mechanics and modern quantum mechanics, with the transition from a deterministic environment to a stochastic environment. The RBC models show that Business Cycle is determined also in the DGE models, the cause of which is real, rather than monetary or demand-related causes. The contents of the numerical solution methods are then illustrated, in particular the use of the DYNARE software, and the systematic presentation of the codes of the various models considered. Finally, the illustration of the project concludes by considering a basic model of the NKE and then its extension to a medium-sized model.