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Aggregate employment, real business cycles, and superior information

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  • Boileau, Martin
  • Normandin, Michel

Abstract

We test whether dynamic, stochastic, general equilibrium artificial economies associated with several labor market institutions provide an adequate characterization of aggregate employment volatility and dynamics. Our test is robust to possible misspecifications about the information set used by economic agents to forecast future events. Accounting for the agents' superior information, we find that the divisible labor, indivisible labor, and labor hoarding structures replicate employment volatility, in contrast to the nominal wage contracts and labor adjustment costs structures. Also, the labor hoarding structure provides a substantially better account of employment dynamics than the other labor market structures.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 49 (2002)
Issue (Month): 3 (April)
Pages: 495-520

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Handle: RePEc:eee:moneco:v:49:y:2002:i:3:p:495-520

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Web page: http://www.elsevier.com/locate/inca/505566

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Citations

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Cited by:
  1. Boileau, Martin & Normandin, Michel, 2008. "Dynamics of the current account and interest differentials," Journal of International Economics, Elsevier, vol. 74(1), pages 35-52, January.
  2. Michel Normandin, 2006. "Fiscal Policies, External Deficits, and Budget Deficits," Cahiers de recherche 0632, CIRPEE.
  3. Martin Boileau & Michel Normandin, 1999. "Capacity Utilization and the Dynamics of Business Cycle Fluctuations," Cahiers de recherche CREFE / CREFE Working Papers 92, CREFE, Université du Québec à Montréal.
  4. James M. Nason & Gregor W. Smith, 2005. "Identifying the New Keynesian Phillips curve," Working Paper 2005-01, Federal Reserve Bank of Atlanta.
  5. Martin Boileau & Michel Normandin, 2001. "Labor Hoarding, Superior Information and Business Cycle Dynamics," Cahiers de recherche CREFE / CREFE Working Papers 129, CREFE, Université du Québec à Montréal.
  6. Foued Chihi & Michel Normandin, 2008. "External and Budget Deficits in Developing Countries," Cahiers de recherche 0819, CIRPEE.
  7. Alok Johri, Marc-André Letendre, 2006. "What do “residuals” from first-order conditions reveal about DGE models?," Department of Economics Working Papers 2006-01, McMaster University.
  8. Martin Boileau & Michel Normandin, 2008. "Do Tax Cuts Generate Twin Deficits? A Multi-Country Analysis," Cahiers de recherche 0832, CIRPEE.
  9. Denis Larocque & Michel Normandin, 2004. "Econometric Inference, Cyclical Fluctuations, and Superior Information," Cahiers de recherche 0434, CIRPEE.
  10. Boileau, Martin & Normandin, Michel, 2003. "Capacity utilization, superior information, and the business cycle," Journal of Macroeconomics, Elsevier, vol. 25(3), pages 283-309, September.

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