Accounting for Business Cycles

Pedro Brinca, Varadarajan Chari, Patrick Kehoe and Ellen McGrattan

No 22663, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We elaborate on the business cycle accounting method proposed by Chari, Kehoe, and McGrattan (2007), clear up some misconceptions about the method, and then apply it to compare the Great Recession across OECD countries as well as to the recessions of the 1980s in these countries. We have four main findings. First, with the notable exception of the United States, Spain, Ireland, and Iceland, the Great Recession was driven primarily by the efficiency wedge. Second, in the Great Recession, the labor wedge plays a dominant role only in the United States, and the investment wedge plays a dominant role in Spain, Ireland, and Iceland. Third, in the recessions of the 1980s, the labor wedge played a dominant role only in France, the United Kingdom, Belgium, and New Zealand. Finally, overall in the Great Recession the efficiency wedge played a more important role and the investment wedge played a less important role than they did in the recessions of the 1980s.

JEL-codes: E00 E12 E13 E22 E24 E44 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-mac
Note: EFG IFM LS ME
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Citations: View citations in EconPapers (59)

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Related works:
Chapter: Accounting for Business Cycles (2016)
Working Paper: Accounting for Business Cycles (2016)
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