Search in the labor market and the real business cycle

Article Abstract:

The standard real business cycle model is modified to enhance its capability of explaining the stylized facts that express the key characteristics of the US labor market. This is accomplished by incorporating two-sided search in the labor market as an economic mechanism that propagates technology stocks. The model performs well in yielding the relative cyclical behavior of variables related to the labor market and of aggregates such as private consumption, capital investment and capital stock. It also mimics well some of the remarkable features of the dynamic behavior of the labor market.

Research, Labor market, Search theory

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Can a real business cycle model pass the Watson test?

Article Abstract:

An improvement in the real business cycle model for the model to conform with real-world data can be done with the incorporation of leisure choice and employment externality in the habit formation parameter of the labor market aspect of the model. Both factors increase the spectral density differentials observed that are observed to vanish in the Watson test. This is due to the large elasticity observed in both factors especially under conditions of intertemporal substitution.

Economics, Research and Development in the Social Sciences and Humanities, Economic research, Work, Work (Labor)

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Real business cycles and sunspot fluctuations are observationally equivalent

Article Abstract:

Real business cycle (RBC) models are proven to be similar to externality models. Externality models are more flexible than RBC models when it comes to standard first-order systems. This partly accounts for the better performance of externality models compared to RBC models in generating realistic business cycle behavior.

Analysis, Externalities (Economics)

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