DP4522 Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Post-War US Data?

Author(s): Jordi GalĂ­, Pau Rabanal
Publication Date: August 2004
Keyword(s): nominal rigidities, real business cycles, real frictions, technology shocks
JEL(s): E32
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4522

Our answer: not so well. We reach that conclusion 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, pointing instead to demand factors as the main force behind the strong positive co-movement between output and labor input measures.