Creator: Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 232 Abstract:
A model of a "real" business cycle is produced in which labor market participants possess private information. A class of economies is considered in which interesting cycles cannot arise without private information. A methodology adapted from Kydland and Prescott (1982) is then employed to show that models based on private information can empirically confront salient features of postwar U.S. business cycles. Moreover, this can be done in a way which is consistent with existing microeconomic evidence on wages and labor supply. Finally, it is shown that the important features of the model related to private information are fairly general.
Keyword: Unemployment, Labor markets, Assymetric information, and Labor contracts Subject (JEL): D82 - Information, knowledge, and uncertainty - Asymmetric and private information and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles