This paper attempts to assess whether money can generate persistent economic" fluctuations in dynamic general equilibrium models of the business cycle. We show that a small" nominal friction in the goods market can make the response of output to monetary shocks large" and persistent if it is...

Using 1979-2011 Current Population Survey data for the United States and 1975-2011 New Earnings Survey data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real...

Intangible capital is an important factor of production in modern economies that is generally neglected in business cycle analyses. We demonstrate that intangible capital can have a substantial impact on business cycle dynamics, especially if the intangible is complementary with production...

Modern monetary business-cycle models rely heavily on price and wage rigidity. While there is substantial evidence that prices do not adjust frequently, there is much less evidence on whether wage rigidity is an important feature of real world labor markets. While real average hourly earnings...

Employment and hours appear far more cyclical than dictated by the behavior of productivity and consumption. This puzzle has been called “the labor wedge” — a cyclical intratemporal wedge between the marginal product of labor and the marginal rate of substitution of consumption for...

In the period since the 1960's, as in other periods, aggregate time series on real wages have displayed only modest cyclicality. Macroeconomists therefore have described weak cyclicality of real wages as a salient feature of the business cycle. Contrary to this conventional wisdom, our analysis...

Employer-provided nonwage benefit expenditures now account for one-third of U.S. firms' labor costs. We show that a broad measure of real labor costs including such benefit expenditures has become countercyclical during 1982-2014, contrary to the conventional view that labor costs are...

This paper considers a model where individual workers bargain with firms over their wages and where their bargaining power is so strong that some workers are unemployed. The result is that an increase in the elasticity of demand facing individual firms raises employment (as in the case where the...

In models recently published by several influential macroeconomic theorists, rigidity in the real wages that firms pay newly hired workers plays a crucial role in generating realistically large cyclical fluctuations in unemployment. There is remarkably little evidence, however, on whether...

The persistence of inflation during periods of high unemployment poses the central problem for macroeconomic policy in coming years. The extent of success in reducing both inflation and unemployment will depend strongly on the short-run responsiveness of wage inflation to unemployment and excess...