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

  • Galí, Jordi

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 non-stationary in those models, while preserving the property of balanced growth. Second, I show that the post-war 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4915.

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Date of creation: Feb 2005
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Handle: RePEc:cpr:ceprdp:4915
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  1. James H. Stock & Mark W. Watson, 1998. "Business Cycle Fluctuations in U.S. Macroeconomic Time Series," NBER Working Papers 6528, National Bureau of Economic Research, Inc.
  2. Whelan, Karl, 2006. "New Evidence on Balanced Growth, Stochastic Trends, and Economic Fluctuations," MPRA Paper 5910, University Library of Munich, Germany.
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  7. Edward C. Prescott, 2004. "Why Do Americans Work So Much More Than Europeans?," Levine's Bibliography 122247000000000413, UCLA Department of Economics.
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  10. Neville Francis & Valerie A. Ramey, 2002. "Is the Technology-Driven Real Business Cycle Hypothesis Dead?," NBER Working Papers 8726, National Bureau of Economic Research, Inc.
  11. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
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  14. Christopher J. Erceg & Luca Guerrieri, 2004. "Can Long-Run Restrictions Identify Technology Shocks?," Computing in Economics and Finance 2004 3, Society for Computational Economics.
  15. Whelan, Karl, 2004. "Technology Shocks and Hours Worked: Checking for Robust Conclusions," Research Technical Papers 6/RT/04, Central Bank of Ireland.
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  18. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
  19. Hall, Robert E, 1997. "Macroeconomic Fluctuations and the Allocation of Time," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S223-50, January.
  20. 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.
  21. Neville Francis & Valerie A. Ramey, 2004. "The Source of Historical Economic Fluctuations: An Analysis using Long-Run Restrictions," NBER Working Papers 10631, National Bureau of Economic Research, Inc.
  22. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  23. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  24. Argia M. Sbordone, 2001. "An Optimizing Model of U.S. Wage and Price Dynamics," Departmental Working Papers 200110, Rutgers University, Department of Economics.
  25. John Fernald, 2004. "Trend Breaks, Long Run Restrictions, and the Contractionary Effects of Technology Shocks," 2004 Meeting Papers 477, Society for Economic Dynamics.
  26. 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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