A Business Cycle Model with Private Information

Creator Series Issue number
  • 232
Date Created
  • 1985-07
  • 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.

Subject (JEL) Palabra Clave Alternative title
  • Reconciling individual and aggregate differences in labor markets : an adverse selection approach / Bruce D. Smith.
Date Modified
  • 07/11/2019
Corporate Author
  • Federal Reserve Bank of Minneapolis. Research Department
  • Federal Reserve Bank of Minneapolis
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