Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations

Lawrence Christiano and Martin Eichenbaum

American Economic Review, 1992, vol. 82, issue 3, 430-50

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. The authors 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. Their empirical results indicate that it does. Copyright 1992 by American Economic Association.

Date: 1992
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Working Paper: Current real business cycle theories and aggregate labor market fluctuations (1990)
Working Paper: Current real business cycle theories and aggregate labor market fluctuations (1990)
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