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Overtime, effort and the propagation of business cycle shocks

Author

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  • George J. Hall

Abstract

This paper presents and estimates a variant of Hansen and Sargent's (1988) real business cycle model with straight time and overtime. The model presented has only one latent variable, the state of technology, yet it does a better job propagating and magnifying shocks than the labor hoarding models which incorporate unobserved effort. This model, as well as a version of Burnside, Eichenbaum and Rebelo's (1993) labor hoarding model, is estimated using maximum likelihood. The maximum likelihood parameter estimates are compared to those using GMM.

Suggested Citation

  • George J. Hall, 1994. "Overtime, effort and the propagation of business cycle shocks," Working Paper Series, Macroeconomic Issues 94-25, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhma:94-25
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    Cited by:

    1. Takashi Kano & James M. Nason, 2014. "Business Cycle Implications of Internal Consumption Habit for New Keynesian Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(2-3), pages 519-544, March.
    2. Givens, Gregory E., 2011. "Unemployment insurance in a sticky-price model with worker moral hazard," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1192-1214, August.
    3. Wemy, Edouard, 2021. "Capital-labor substitution elasticity: A simulated method of moments approach," Economic Modelling, Elsevier, vol. 97(C), pages 14-44.
    4. Franchi, Massimo & Jusélius, Katarina, 2007. "Taking a DSGE Model to the Data Meaningfully," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-38.
    5. Yuan, Mingwei & Li, Wenli, 2000. "Dynamic employment and hours effects of government spending shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 24(8), pages 1233-1263, July.
    6. Pablo A. Guerrón-Quintana & James M. Nason, 2013. "Bayesian estimation of DSGE models," Chapters, in: Nigar Hashimzade & Michael A. Thornton (ed.), Handbook of Research Methods and Applications in Empirical Macroeconomics, chapter 21, pages 486-512, Edward Elgar Publishing.
    7. Juan F. Rubio-Ramirez & Jesus Fernández-Villaverde, 2005. "Estimating dynamic equilibrium economies: linear versus nonlinear likelihood," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(7), pages 891-910.
    8. Christiano, Lawrence J. & Vigfusson, Robert J., 2003. "Maximum likelihood in the frequency domain: the importance of time-to-plan," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 789-815, May.
    9. Louis Phaneuf & Nooman Rebei, 2007. "Technology Shocks and Business Cycles: The Role of Processing Stages and Nominal Rigidities," Staff Working Papers 07-7, Bank of Canada.
    10. Malley, Jim & Woitek, Ulrich, 2010. "Technology shocks and aggregate fluctuations in an estimated hybrid RBC model," Journal of Economic Dynamics and Control, Elsevier, vol. 34(7), pages 1214-1232, July.
    11. Ireland, Peter N., 2004. "A method for taking models to the data," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1205-1226, March.
    12. Andreas Hornstein, 2002. "Towards a theory of capacity utilization: shiftwork and the workweek of capital," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 65-86.
    13. Guangling (Dave) Liu & Rangan Gupta & Eric Schaling, 2007. "Forecasting the South African Economy: A DSGE-VAR Approach," Working Papers 200724, University of Pretoria, Department of Economics.
    14. Marc P. Giannoni & Jean Boivin, 2005. "DSGE Models in a Data-Rich Environment," Computing in Economics and Finance 2005 431, Society for Computational Economics.
    15. Christiano, Lawrence J. & G. Harrison, Sharon, 1999. "Chaos, sunspots and automatic stabilizers," Journal of Monetary Economics, Elsevier, vol. 44(1), pages 3-31, August.
    16. Lawrence J. Christiano & Robert J. Vigfusson, 1999. "Maximum likelihood in the frequency domain: a time to build example," Working Papers (Old Series) 9901, Federal Reserve Bank of Cleveland.
    17. Ryan Chahrour & Sanjay K. Chugh & Tristan Potter, 2014. "Searching for Wages in an Estimated Labor Matching Model," Boston College Working Papers in Economics 867, Boston College Department of Economics, revised 20 Dec 2016.
    18. repec:rza:wpaper:051 is not listed on IDEAS
    19. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital Utilization and Returns to Scale," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 67-124, National Bureau of Economic Research, Inc.
    20. Joao Madeira, 2013. "Assessing the empirical relevance of Walrasian labor frictions to business cycle fluctuations," Discussion Papers 1304, University of Exeter, Department of Economics.
    21. Ruge-Murcia, Francisco J., 2007. "Methods to estimate dynamic stochastic general equilibrium models," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2599-2636, August.
    22. Ireland, Peter N., 2001. "Technology shocks and the business cycle: On empirical investigation," Journal of Economic Dynamics and Control, Elsevier, vol. 25(5), pages 703-719, May.
    23. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
    24. Bouakez, Hafedh & Cardia, Emanuela & Ruge-Murcia, Francisco J., 2005. "Habit formation and the persistence of monetary shocks," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1073-1088, September.
    25. Lee, Jiho, 2012. "Are structural parameters of DSGE models stable in Korea?," Journal of Asian Economics, Elsevier, vol. 23(1), pages 50-59.

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