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July/August 2005

Productivity, Labor, and the Business Cycle

Posted 2005-07-01

What's Real About the Business Cycle?

by James D. Hamilton

This paper 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.

Posted 2005-07-01

Commentary on "What's Real About the Business Cycle?"

by Mark W. Watson

Posted 2005-07-01

Trends in Hours, Balanced Growth, and the Role of Technology in the Business Cycle

by Jordi Galí

This paper 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.

Posted 2005-07-01

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

by Christopher A. Sims

Posted 2005-07-01

The Cyclicality of Hires, Separations, and Job-to-Job Transitions

by Robert Shimer

This paper 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.

Posted 2005-07-01

Commentary on "The Cyclicality of Hires, Separations, and Job-to-Job Transitions"

by Randall Wright

Posted 2005-07-01

Reexamining the Monetarist Critique of Interest Rate Rules

by Robert G. King and Mau-Ting Lin

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.

Posted 2005-07-01

Commentary on "Reexamining the Monetarist Critique of Interest Rate Rule"

by Julio J. Rotemberg

Posted 2005-07-01

Productivity and the Post-1990 U.S. Economy

by Ellen R. McGrattan and Edward C. Prescott

In this paper, 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.

Posted 2005-07-01

Commentary on "Productivity and the Post-1990 U.S. Economy"

by Ricardo J. Caballero

Posted 2005-07-01

Organizational Dynamics Over the Business Cycle: A View on Jobless Recoveries

by Kathryn Koenders and Richard Rogerson

This paper 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.

Posted 2005-07-01

Commentary on "Organizational Dynamics Over the Business Cycle: A View on Jobless Recoveries"

by Fernando Alvarez

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