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Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?

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  • Jordi Gali

Abstract

The author estimate a decomposition of productivity and hours into technology and nontechnology components. Two results stand out: (1) the estimated conditional correlations of hours and productivity are negative for technology shocks, positive for nontechnology shocks; and (2) hours show a persistent decline in response to a positive technology shock. Most of the results hold for a variety of model specifications and for the majority of G7 countries. The picture that emerges is hard to reconcile with a conventional real-business-cycle interpretation of business cycles but is shown to be consistent with a simple model with monopolistic competition and sticky prices.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.89.1.249
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Bibliographic Info

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

Volume (Year): 89 (1999)
Issue (Month): 1 (March)
Pages: 249-271

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:1:p:249-271

Note: DOI: 10.1257/aer.89.1.249
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References

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  1. Real Business Cycles with a Human Capital Investment Sector and Endogenous Growth: Persistence, Volatility and Labor Puzzles
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  2. Matching Theory and Data: Bayesian Vector Autoregression and Dynamic Stochastic General Equilibrium Models
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