Search in the labor market and the real business cycle

Existing models of the business cycle have been incapable of explaining many of the stylized facts that characterize the US labor market. The standard real business cycle model is modified by introducing two-sided search in the labor market as an economic mechanism that propagates technology shocks. This new analytical environment can explain many phenomena of the business cycle that the standard model either has resolved in an unsatisfactory manner or has not been able to address at all.