American Economic Review Vol. 82 No. 3 1992
Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations
Abstract
Hours worked and the return to working are weakly correlated. Traditionally, the ability to account for this fact has been a litmus test for macroeconomic models. Existing real-business-cycle models fail this test dramatically. We modify prototypical real-business-cycle models by allowing government consumption shocks to influence labor-market dynamics. This modification can, in principle, bring the models into closer conformity with the data. Our empirical results indicate that it does.
- Volume
- 82
- Issue
- 3
- Pages
- 430-450
- Sources
- bibtex:phds-export.bib