Abstract

The dynamic general equilibrium model is one of the dominant macroeconomic framework and one of the most used mode of business analysis within the neoclassical thought. This article surveys a great deal of debate and some adjustments used by the literature to force the model's equilibrium to be Pareto suboptimal, and present a collection of results obtained with real business cycle models constructed and calibrated for the Italian economy, focusing on labor market features. A detailed introduction shows the standard framework defined by Prescott and Merha (1980), while the rest of the paper includes some developments of this scheme applied to the Italian economy, providing simulation results and a comparative assessment of the strengths and weaknesses of the models. Some new recent developments and extensions of the standard framework, particularly interesting for building and simulating artificial economies are discussed at the end of the paper.