Business cycle measurement with some theory

Fabio Canova and Matthias Paustian

Journal of Monetary Economics, 2011, vol. 58, issue 4, 345-361

Abstract: A method to evaluate cyclical models not requiring knowledge of the DGP and the exact specification of the aggregate decision rules is proposed. We derive robust restrictions in a class of models; use some to identify structural shocks in the data and others to evaluate the class or contrast sub-models. The approach has good properties, even in small samples, and when the class of models is misspecified. The method is used to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers) in a standard class of models.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:58:y:2011:i:4:p:345-361

DOI: 10.1016/j.jmoneco.2011.07.005

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