Technology shocks and the business cycle

This article assesses the quality of the empirical evidence provided by RBC analysts to support their substantive claims regarding the cyclical role of technology shocks. I argue that the data and the methods used by these analysts are, in fact, almost completely uninformative about the role of technology shocks in generating aggregate fluctuations in U.S. output. In addition I argue that their conclusions are not robust either to changes in the sample period investigated or to small perturbations in their models. For these reasons, I conclude that the empirical results in the RBC literature do not constitute a convincing challenge to the traditional view regarding the cyclical importance of aggregate demand shocks.