Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/70699 
Year of Publication: 
2008
Series/Report no.: 
Working Paper No. 2008-10
Publisher: 
Federal Reserve Bank of Atlanta, Atlanta, GA
Abstract: 
Recent empirical evidence suggests that a positive technology shock leads to a decline in labor inputs. However, the standard real business cycle model fails to account for this empirical regularity. Can the presence of labor market frictions address this problem without otherwise altering the functioning of the model? We develop and estimate a real business cycle model using Bayesian techniques that allows but does not require labor market frictions to generate a negative response of employment to a technology shock. The results of the estimation support the hypothesis that labor market frictions are responsible for the negative response of employment.
Subjects: 
technology shocks
employment
labor market frictions
JEL: 
E32
Document Type: 
Working Paper

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