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Is the empirical relationship between hours and productivity effected by corporate profits?

Author

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  • Kashif Zaheer Malik

    (Lahore University of Management Sciences)

  • Syed Zahid Ali

    (Lahore University of Management Sciences)

Abstract

This paper studies the behaviour of hours-worked in the event of positive technology shock first in the closed economy DSGE model and second by adding a corporate profits in a bivariate SVAR model. Our analytical results show that in the presence of sticky prices, hours decrease in the event of a shock. However, in case of flexible prices or when central bank systematically respond to technology shocks, hours increase. Results based on SVAR model show that the inclusion of profits change the result of Gali (1999) by showing that hours increase at the aggregate level. However, sectoral analysis reveals different picture. Out of four only one sector is consistent with aggregate findings.

Suggested Citation

  • Kashif Zaheer Malik & Syed Zahid Ali, 2020. "Is the empirical relationship between hours and productivity effected by corporate profits?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(1), pages 99-119, January.
    • Handle: RePEc:spr:jecfin:v:44:y:2020:i:1:d:10.1007_s12197-019-09477-5
    DOI: 10.1007/s12197-019-09477-5
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    Cited by:

    1. Christopher Loewald, 2021. "Macro works applying integrated policy frameworks to South Africa," Working Papers 11016, South African Reserve Bank.

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    More about this item

    Keywords

    Productivity; Shocks; Hours; Corporate profits; SVAR (structural vector auto-regressive);
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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