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

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  • Jordi Galí

Abstract

The present paper revisits a property embedded in most dynamic macroeconomic models: the stationarity of hours worked. First, I argue 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. Second, I show that the postwar evidence for most industrialized economies is clearly at odds with the assumption of stationary hours per capita. Third, I examine the implications of that evidence for the role of technology as a source of economic fluctuations in the G7 countries.

Suggested Citation

  • Jordi Galí, 2004. "Trends in Hours, Balanced Growth, and the Role of Technology in the Business Cycle," Working Papers 187, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:187
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    File URL: http://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/187.pdf
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    References listed on IDEAS

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    1. Jordi Galí & Pau Rabanal, 2005. "Technology Shocks and Aggregate Fluctuations: How Well Does the Real Business Cycle Model Fit Postwar U.S. Data?," NBER Chapters,in: NBER Macroeconomics Annual 2004, Volume 19, pages 225-318 National Bureau of Economic Research, Inc.
    2. Christopher J. Erceg & Luca Guerrieri & Christopher Gust, 2005. "Can Long-Run Restrictions Identify Technology Shocks?," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1237-1278, December.
    3. Neville R. Francis & Michael T. Owyang & Athena T. Theodorou, 2005. "What Explains the Varying Monetary Response to Technology Shocks in G-7 Countries?," International Journal of Central Banking, International Journal of Central Banking, vol. 1(3), December.
    4. Whelan, Karl T., 2009. "Technology shocks and hours worked: Checking for robust conclusions," Journal of Macroeconomics, Elsevier, vol. 31(2), pages 231-239, June.
    5. Karl Whelan, 2004. "New evidence on balanced growth, stochastic trends, and economic fluctuations," Open Access publications 10197/218, School of Economics, University College Dublin.
    6. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What Happens After a Technology Shock?," NBER Working Papers 9819, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Lim, G.C. & McNelis, Paul D., 2008. "Computational Macroeconomics for the Open Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262123061, January.

    More about this item

    Keywords

    real business cycles; technology shocks; market frictions; balanced growth path; stationarity of hours;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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