Is Theory Really Ahead of Measurement? Current Real Business Cycle Theories and Aggregate Labor Market Fluctuations

  title={Is Theory Really Ahead of Measurement? Current Real Business Cycle Theories and Aggregate Labor Market Fluctuations},
  author={Lawrence J. Christiano and Martin Eichenbaum},
In the l93Os, Dunlop and Tarshis observed that the correlation between hours and wages is close to zero. This classic observation has become a litmus test by which macroeconomic models are judged. Existing real business cycle models fail this test dramatically. Based on this result, we argue that technology shocks cannot be the sole impulse driving post-war U.S. business cycles. We modify prototypical real business cycle models by allowing government spending shocks to influence labor market… 

Estimating baseline real business cycle models of the Australian economy

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Can market-clearing models explain U.S. labor market fluctuations?

Throughout the past two decades, market-clearing models of the business cycle have been praised for their ability to explain key empirical features of the post-war U.S. business cycle. Real business

[Building Blocks of Market Clearing Business Cycle Models]: Comment

Over the last two decades much progress has been made in macroeconomics. Using established theory-that is the theory used by leading people in public finance-we have found that variations in the

Output Dynamics in Real-Business-Cycle Models

The time series literature reports two stylized facts about output dynamics in the United States. GNP growth is positively autocorrelated over short horizons and negatively autocorrelated over longer

What Do Technology Shocks Do?

  • J. Shea
  • Economics
    NBER Macroeconomics Annual
  • 1998
The real-business-cycle literature has largely ignored the empirical question of what role technology shocks actually play in business cycles. The observed procyclicality of total factor productivity

Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations

Using data for the G7 countries, I estimate conditional correlations of employment and productivity, based on a decomposition of the two series into technology and non-technology components. The

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Real Wages over the Business Cycle: Evidence from Panel Data

  • M. Bils
  • Economics
    Journal of Political Economy
  • 1985
One topic on which Keynes did not disagree with classical economists was the cyclical behavior of real wages. Keynes (1936) as well as various classical writers predicted that real wages should move

Changes in the Cyclical Pattern of Real Wages: Evidence from Nine Countries, 1955-80

monetary policy. In the United Kingdom, the monetarist vice has gripped the economy even longer, and similar deflationary policies have been in effect in other Western economies. Interestingly

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Deaton (1986) has noted that if income is a first-order autoregressive process in first differences, then a simple version of Friedman’s permanent income hypothesis (SPIH) implies that measured U.S.