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Output Dynamics in Real-Business-Cycle Models

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  • Cogley, Timothy
  • Nason, James M

Abstract

The time-series literature reports two stylized facts about output dynamics in the United States: GNP growth is positively autocorrelated and GNP appears to have an important trend-reverting component. This paper investigates whether current real-business-cycle models are consistent with these stylized facts. Many real-business-cycle models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts. Models that incorporate labor adjustment costs are partially successful. They endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend-reverting component in output. Copyright 1995 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 85 (1995)
Issue (Month): 3 (June)
Pages: 492-511

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Handle: RePEc:aea:aecrev:v:85:y:1995:i:3:p:492-511

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Real Business Cycles with a Human Capital Investment Sector and Endogenous Growth: Persistence, Volatility and Labor Puzzles
    by Christian Zimmermann in NEP-DGE blog on 2011-04-14 19:22:54
  2. Sobre recesiones, recuperacionesâ?¦. y previsiones
    by David López-Salido in Nada Es Gratis on 2009-09-18 03:27:36
  3. Krugman was looking under a lamppost
    by pushmedia1 in The Ambrosini Critique on 2009-09-17 16:42:26

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  1. > Macroeconomics > Economic Fluctuations > Real Business Cycle Theory
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  1. Quantitative Macroeconomics and Real Business Cycles (QM&RBC)

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