Building Blocks of Market Clearing Business Cycle Models

Kevin Murphy, Andrei Shleifer and Robert Vishny

No 3004, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We compare "real business cycle" and increasing returns models of economic fluctuations. In these models, business cycles are driven by productivity changes resulting either from technology shocks or from crucial building blocks that give both types of models hope of fitting the data. These building blocks include durability of goods, specialized labor, imperfect credit and elastic labor supply. We also present new evidence on co-movement of both outputs sand labor inputs across sectors and on the increasing returns model is easier to reconcile with the data than the real business cycle model.

Date: 1989-06
Note: EFG
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Published as Blanchard, Olivier Jean and Stanley Fischer (eds.) NBER Macroeconomics Annual 1989. Cambridge, MA: MIT Press, 1989.
Published as Building Blocks of Market Clearing Business Cycle Models , Kevin M. Murphy, Andrei Shleifer, Robert W. Vishny. in NBER Macroeconomics Annual 1989, Volume 4 , Blanchard and Fischer. 1989

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