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This article introduces and analyzes a Walrasian model of worker flows, job flows, vacancies, and unemployment. Calibrating the model to U.S. data, the article finds that all variables comove with output quite well but that they fluctuate too little. However, the failure is not as bad as in 'Shimer's puzzle.' Interestingly, the article also finds that introducing establishment dynamics into the model, while realistic, is irrelevant for understanding unemployment and vacancy fluctuations: The business cycles of the model with establishment dynamics are virtually the same as those of a version with a representative firm. [ABSTRACT FROM AUTHOR]

Examines the Great Depression in the United States from 1929 to 1933 from the perspective of neoclassical growth theory. Background discussion on the neoclassical theory; International comparisons of economic declines; Analysis of three classes of real shocks considered important in typical business cycle fluctuations; Information on monetary shocks.

Basic contemporary portfolio models are applied to an interregional economic analysis of U.S. Census Regions during 1963-1978. The models are well suited to the type of analysis that partitions a region's economic cycle into national and local components. Portfolio theory provides a logic for interregional cross investment; results of an empirical test indicate portfolio theory may be superior to simple neoclassical theory in explaining spatial patterns of capital investment. [ABSTRACT FROM AUTHOR]

In this paper we study the quantitative implications of nominal wage contracts for business cycle fluctuations. We address this issue using a model economy based on the neoclassical growth model supplemented by the assumption that cash is needed to purchase goods. We consider a variation of the standard recursive competitive equilibrium concept that is intended to capture the important features of wage contracting. We use this equilibrium construct to address three issues. First, we consider whether monetary shocks, propagated by nominal contracts, constitute a viable alternative to technology shocks as a source of aggregate fluctuations. Our results suggest that, while monetary shocks and nominal rigidities succeed in causing output volatility of the required magnitude, the resulting data have properties that are inconsistent with several key features of U.S. data. Second, we consider how the behavior of the economy varies with contract length. We find that the volatility induced by both monetary and technology shocks increases sharply with contract length. Finally we consider how much rigidity would be necessary to match the volatility of U.S. output. We find that only a very small amount of rigidity would be necessary to cause output volatility of the magnitude observed. [ABSTRACT FROM AUTHOR]

THE AUCTION-MARKET ANALYSIS of prices and quantities is the core of neoclassical economics; however, as we will see, viewing the aggregate labor market as an auction has not proved particularly useful for understanding cyclical fluctuations in employment, unemployment, and the real wage. Do any of the theoretical alternatives to the auction interpretation produce an empirically superior description of a U.S. recession, though? The purpose of this paper is to survey these issues and to summarize what economists can honestly tell students and policymakers concerning how the aggregate U.S. labor market operates when subjected to business cycle disturbances. In the remainder of this section we lay the groundwork necessary to evaluate the state of our economic knowledge of the aggregate labor market. In particular, we first present macroeconomic facts that summarize the typical postwar recession in the United States. Keeping them in The last part of this section previews the remainder of this review, which evaluates the literature attempting to test three types of theories of the aggregate labor market: (i) models that reformulate the basic auction analysis, (ii) models that view the aggregate labor market as characterized by persistent disequilibrium, and (iii) models that synthesize (i) and (ii) and treat workers and firms as governed by the outcomes of long-term contracts for labor services. [ABSTRACT FROM AUTHOR]