IDEAS home Printed from https://ideas.repec.org/p/cre/crefwp/55.html
   My bibliography  Save this paper

Aggregate Employment, Real Business Cycles, and Superior Information

Author

Listed:

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.

Suggested Citation

  • Martin Boileau & Michel Normandin, 1997. "Aggregate Employment, Real Business Cycles, and Superior Information," Cahiers de recherche CREFE / CREFE Working Papers 55, CREFE, Université du Québec à Montréal.
  • Handle: RePEc:cre:crefwp:55
    as

    Download full text from publisher

    File URL: http://www.unites.uqam.ca/eco/CREFE/cahiers/cah55.ps
    File Function: Main text (without figures)
    Download Restriction: no

    File URL: http://www.unites.uqam.ca/eco/CREFE/cahiers/cah55.pdf
    File Function: Main text (with figures)
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, pages 9-22.
    2. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-775, August.
    3. Julius Horvath & Magda Kandil & Subhash Sharma, 1998. "On the European monetary system: the spillover effects of German shocks and disinflation," Applied Economics, Taylor & Francis Journals, vol. 30(12), pages 1585-1593.
    4. Cho, Jang-Ok & Cooley, Thomas F, 1995. "The Business Cycle with Nominal Contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 13-33.
    5. Lars Peter Hansen & Thomas J. Sargent, 1981. "Instrumental variables procedures for estimating linear rational expectations models," Staff Report 70, Federal Reserve Bank of Minneapolis.
    6. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    7. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, pages 309-327.
    8. Hansen, Lars Peter & Sargent, Thomas J., 1982. "Instrumental variables procedures for estimating linear rational expectations models," Journal of Monetary Economics, Elsevier, pages 263-296.
    9. John Campbell & Angus Deaton, 1989. "Why is Consumption So Smooth?," Review of Economic Studies, Oxford University Press, vol. 56(3), pages 357-373.
    10. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, pages 309-327.
    11. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, pages 1154-1174.
    12. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-1088, October.
    13. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, pages 492-511.
    14. Ingram, B.F. & Kocherlakota, N.R. & Savin, N.E., 1992. "Explaining Business Cycles : A Multiple Shock Approach," Working Papers 92-09, University of Iowa, Department of Economics.
    15. Evans, Charles L., 1992. "Productivity shocks and real business cycles," Journal of Monetary Economics, Elsevier, pages 191-208.
    16. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
    17. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, pages 3-16.
    18. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, pages 11-44.
    19. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, pages 430-450.
    20. Evans, Charles L., 1992. "Productivity shocks and real business cycles," Journal of Monetary Economics, Elsevier, pages 191-208.
    21. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, pages 3-16.
    22. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-273, April.
    23. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-947, October.
    24. Normandin, Michel, 1999. "Budget deficit persistence and the twin deficits hypothesis," Journal of International Economics, Elsevier, pages 171-193.
    25. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, pages 492-511.
    26. Normandin, Michel, 1999. "Budget deficit persistence and the twin deficits hypothesis," Journal of International Economics, Elsevier, pages 171-193.
    27. Jang-Ok Cho, 1993. "Money and Business Cycle with One-Period Nominal Contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 638-659, August.
    28. Ingram, Beth Fisher & Kocherlakota, Narayana R. & Savin, N. E., 1994. "Explaining business cycles: A multiple-shock approach," Journal of Monetary Economics, Elsevier, pages 415-428.
    29. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
    30. 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, pages 195-232.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Boileau & Michel Normandin, 2008. "Do Tax Cuts Generate Twin Deficits? A Multi-Country Analysis," Cahiers de recherche 0832, CIRPEE.
    2. Boileau, Martin & Normandin, Michel, 2008. "Dynamics of the current account and interest differentials," Journal of International Economics, Elsevier, pages 35-52.
    3. Martin Boileau & Michel Normandin, 2012. "Do tax cuts generate twin deficits? A multi-country analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1667-1699, November.
    4. 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.
    5. James M. Nason & Gregor W. Smith, 2008. "Identifying the new Keynesian Phillips curve," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 525-551.
    6. Denis Larocque & Michel Normandin, 2004. "Econometric Inference, Cyclical Fluctuations, and Superior Information," Cahiers de recherche 0434, CIRPEE.
    7. Johri, Alok & Letendre, Marc-Andre, 2007. "What do `residuals' from first-order conditions reveal about DGE models?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2744-2773, August.
    8. Bellemare, Charles & Shearer, Bruce, 2010. "Sorting, incentives and risk preferences: Evidence from a field experiment," Economics Letters, Elsevier, pages 345-348.
    9. Ambler, Steve, 1999. "Les modèles à agent représentatif et la politique de taxation optimale," L'Actualité Economique, Société Canadienne de Science Economique, vol. 75(4), pages 539-557, décembre.
    10. Boileau, Martin & Normandin, Michel, 2003. "Capacity utilization, superior information, and the business cycle," Journal of Macroeconomics, Elsevier, pages 283-309.
    11. Boileau, Martin & Normandin, Michel, 2003. "Labor hoarding, superior information, and business cycle dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 28(2), pages 397-418, November.
    12. Bouakez, Hafedh & Normandin, Michel, 2010. "Fluctuations in the foreign exchange market: How important are monetary policy shocks?," Journal of International Economics, Elsevier, pages 139-153.
    13. Michel Normandin, 2006. "Fiscal Policies, External Deficits, and Budget Deficits," Cahiers de recherche 0632, CIRPEE.
    14. Chihi, Foued & Normandin, Michel, 2013. "External and budget deficits in some developing countries," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 77-98.

    More about this item

    Keywords

    Labor Market Institutions; Employment Dynamics and Volatility.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cre:crefwp:55. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stéphane Pallage). General contact details of provider: http://edirc.repec.org/data/crefeca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.