Review

This article argues that a linear statistical model with homoskedastic errors cannot capture the nineteenth-century notion of a recurring cyclical pattern in key economic aggregates. A simple nonlinear alternative is proposed and used to illustrate that the dynamic behavior of unemployment seems to change over the business cycle, with the unemployment rate rising more quickly than it falls.

Commentary on "What's Real About the Business Cycle?" by James D. Hamilton.

This article revisits a property embedded in most dynamic macroeconomic models: the stationarity of hours worked. First, the author argues that, contrary to what is often believed, there are many reasons why hours could be nonstationary in those models, while preserving the property of balanced growth.

Commentary on "Trends in Hours, Balanced Growth, and the Role of Technology in the Business Cycle" by Jordi Galí.

This article measures the job-finding, separation, and job-to-job transition rates in the United States from 1948 to 2004. The job-finding and job-to-job transition rates are strongly procyclical and the separation rate is nearly acyclical, especially since 1985. The author develops a simple model in which unemployed workers search for jobs and employed workers search for better jobs.

Commentary on "The Cyclicality of Hires, Separations, and Job-to-Job Transitions" by Robert Shimer.

Monetarist economists argued long ago that central bank interest rate rules exacerbate macro economic fluctuations, essentially by not allowing the interest rate to respond promptly to shifts in the supply and demand for loans. To support this critique, they pointed to the procyclicality of the money stock. Yet, when there are real shocks and a real business cycle, modern macroeconomic models imply that some procyclicality of money is desirable, to stabilize the price level.

Commentary on "Reexamining the Monetarist Critique of Interest Rate Rule" by Robert G. King and Mau-Ting Lin.

The authors show that ignoring corporate intangible investments gives a distorted picture of the post-1990 U.S. economy. In particular, ignoring intangible investments in the late 1990s leads one to conclude that productivity growth was modest, corporate profits were low, and corporate investment was at moderate levels. In fact, the late 1990s was a boom period for productivity growth, corporate profits, and corporate investment.

Commentary on "Productivity and the Post-1990 U.S. Economy" by Ellen R. McGrattan and Edward C. Prescott.

This article proposes a new explanation for the apparent slow growth in employment during the past two recoveries. The authors’ explanation emphasizes dynamics within growing organizations and the intertemporal substitution of organizational restructuring.

Commentary on "Organizational Dynamics Over the Business Cycle: A View on Jobless Recoveries" by Kathryn Koenders and Richard Rogerson.