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

  • Jordi Galí
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    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.

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    Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 187.

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    Date of creation: Oct 2004
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    Handle: RePEc:bge:wpaper:187
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    1. Francis, Neville R & Owyang, Michael T & Theodorou, Athena T, 2005. "What Explains the Varying Monetary Response to Technology Shocks in G-7 Countries?," MPRA Paper 834, University Library of Munich, Germany.
    2. Whelan, Karl, 2004. "Technology Shocks and Hours Worked: Checking for Robust Conclusions," Research Technical Papers 6/RT/04, Central Bank of Ireland.
    3. Christopher J. Erceg & Luca Guerrieri & Christopher J. Gust, 2004. "Can long-run restrictions identify technology shocks?," International Finance Discussion Papers 792, Board of Governors of the Federal Reserve System (U.S.).
    4. Whelan, Karl, 2004. "New Evidence on Balanced Growth, Stochastic Trends, and Economic Fluctations," Research Technical Papers 7/RT/04, Central Bank of Ireland.
    5. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What Happens After a Technology Shock?," NBER Working Papers 9819, National Bureau of Economic Research, Inc.
    6. 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.
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