Business Cycle Anatomy
- American Economic Review (Forthcoming)
We propose a new strategy for dissecting the macroeconomic time
series, provide a template for the business-cycle propagation mechanism that best describes the data, and use its properties to appraise models of both the parsimonious and the medium-scale variety. Our findings support the existence of a main business-cycle
driver but rule out the following candidates for this role: technology
or other shocks that map to TFP movements; news about future
productivity; and in
ationary demand shocks of the textbook type.
Models aimed at accommodating demand-driven cycles without a
strict reliance on nominal rigidity appear promising.
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