NBER Working Papers by Andrea Tambalotti

Not in an estimated DSGE model of the US economy, once we account for the fact that most of the high-frequency volatility in wages appears to be due to noise, rather than to variation in workers' preferences or market power.

We study the driving forces of fluctuations in an estimated New Neoclassical Synthesis model of the U.S. economy with several shocks and frictions. In this model, shocks to the marginal efficiency of investment account for the bulk of fluctuations in output and hours at business cycle frequencies. Imperfect competition and, to a lesser extent, technological frictions are the key to their transmission. Labor supply shocks explain a large fraction of the variation in hours at very low frequencies, but are irrelevant over the business cycle. This is important because their microfoundations are widely regarded as unappealing.

Disturbances affecting agents intertemporal substitution are the key driving force of macroeconomic fluctuations. We reach this conclusion exploiting the bond pricing implications of an estimated general equilibrium model of the U.S. business cycle with a rich set of real and nominal frictions.