The focus of this investigation is on the cyclical response of the real wage to demand shocks. This response differentiates the empirical validity of major New Keynesian explanations of business cycles. The empirical evidence, across industrial countries, highlights a moderate positive...

I present a model in which efficiency wages generate acyclical real wages but do not lower the sensitivity of marginal cost to output or increase price stickiness. Consideration of previous models suggests that efficiency wages are a poor real rigidity

Canova et al. (2010 and 2012) estimate the dynamic response of labor market variables to technological shocks. They show that investment-specific shocks imply almost exclusively an adjustment along the intensive margin (i.e., hours worked), whereas for neutral shocks the largest share of the...

Both imperfect information and sticky prices allow nominal shocks to act as business cycle impulses, but only sticky prices propagate the real effects of nominal shocks. A simple model of imperfect information and sticky prices developed herein indicates that high rates of inflation lead to less...

We develop and estimate a dynamic stochastic general equilibrium model that features sticky prices, a variable elasticity of demand facing firms and firm-specific labor. While reconciling to a good extent the micro and macro evidence on the behavior of prices, the model offers an accurate...