Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Postwar U.S. Data?

IMF Working Papers, December 1, 2004

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Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Postwar U.S. Data?

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Bibliographic details

• Authors: Jordi Gali Garreta, Pau Rabanal
• Published: December 1, 2004
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451875652.001

Summary / Main conclusion

• Our answer: Not so well.
• After reviewing recent research on the role of technology as a source of economic fluctuations, the bulk of the evidence suggests a limited role for aggregate technology shocks.
• Demand factors are identified as the main force behind the strong positive comovement between output and labor input measures.

Key findings and interpretation

• Aggregate technology shocks play a limited role in explaining postwar U.S. business-cycle fluctuations.
• The strong positive comovement between output and labor input measures is better attributed to demand-side forces than to aggregate technology shocks.
• The evidence reviewed challenges the fit of the standard RBC model for postwar U.S. data.

Research scope and topics covered

• Subjects addressed: Business cycles, Economic growth, Labor, Labor productivity, Prices, Production, Sticky prices, Technology.
• Keywords used in the analysis: business cycle, business cycle fluctuation, business cycle model, Business cycles, Labor productivity, monetary policy, Nominal Rigidities, point estimate, positive correlation, production function, RBC literature, RBC model, Real Business Cycles, Real Frictions, real wage, standard deviation, Sticky prices, technology shock, Technology Shocks, time series, WP.

Authors and publication timing

• By Jordi Gali Garreta, Pau Rabanal
• December 1, 2004

IMF Working Paper — Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Postwar U.S. Data?

Content in this bundle

• _wp04234 — Section V: Estimated DSGE analysis of technology shocks, nominal and real frictions
  • _wp04234 — Section V: Estimated DSGE analysis of technology shocks, nominal and real frictions (Markdown version)
  • _wp04234 — Section V: Estimated DSGE analysis of technology shocks, nominal and real frictions (PDF)