Existing Real Business Cycle (RBC) models assume that the key impulses to business cycles are stochastic technology shocks. RBC analysts typically measure these technology shocks by the Solow residual. This paper assesses the sensitivity of inference based on Solow residual accounting to labor...

In the l93Os, Dunlop and Tarshis observed that the correlation between hours and wages is close to zero. This classic observation has become a litmus test by which macroeconomic models are judged. Existing real business cycle models fail this test dramatically. Based on this result, we argue...

In the l93Os, Dunlop and Tarshis observed that the correlation between hours and wages is close to zero. This classic observation has become a litmus test by which macroeconomic models are judged. Existing real business cycle models fail this test dramatically. Based on this result, we argue...