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RBC Models and the Hours-Wages Puzzle: Puzzle Solved!

By Aleksandar Vasilev

Abstract

This paper shows that a modified real business cycle (RBC) model, one that includes home production and fiscal spending shocks, can solve one of the RBC puzzles and generates zero correlation between wages and hours. In addition, the micro-founded model presented here provides a sound theoretical model to analyze fiscal policy in a neoclassical framework and is able to capture many aspects of the data that the benchmark RBC model was missing

Topics: C63, E62, E32, ddc:330, fiscal policy, home production, government spending shock, indivisible labor
Publisher: Kiel und Hamburg: ZBW - Deutsche Zentralbibliothek f\ufcr Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
Year: 2015
OAI identifier: oai:econstor.eu:10419/142466
Provided by: EconStor

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