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| Author: | Christiano, L.J. Eichenbaum, M. |
| Title: | Current real-business-cycle theories and aggregate labor-market fluctuations |
| Journal: | American Economic Review
1992 : JUN, VOL. 82:3, p.430-450 |
| Index terms: | BUSINESS CYCLES LABOUR MARKETS TIME SERIES DEMAND CONSUMPTION STOCHASTIC PROCESSES |
| Language: | eng |
| Abstract: | The quantitative implications of existing real-business-cycle (RBC) models are assessed for the time-series properties of average productivity and hours worked. It was found that the single most salient shortcoming of existing RBC models lies in their predictions for the correlations between these variables. To overcome this shortcoming, aggregate demand shocks are added to the RBC framework which arise from stochastic movements in government consumption, to influence labor-market dynamics. This modification can bring the models into closer conformity with data. According to empirical results, this change substantially improves the economic performance of the models. |
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