On Identification Issues in Business Cycle Accounting Models

Pedro Brinca, Nikolay Iskrev and Francesca Loria

A chapter in Essays in Honour of Fabio Canova, 2022, vol. 44A, pp 55-138 from Emerald Group Publishing Limited

Abstract: Since its introduction by Chari, Kehoe, and McGrattan (2007), Business Cycle Accounting (BCA) exercises have become widespread. Much attention has been devoted to the results of such exercises and to methodological departures from the baseline methodology. Little attention has been paid to identification issues within these classes of models. In this chapter, the authors investigate whether such issues are of concern in the original methodology and in an extension proposed by Šustek (2011) called Monetary Business Cycle Accounting. The authors resort to two types of identification tests in population. One concerns strict identification as theorized by Komunjer and Ng (2011) while the other deals both with strict and weak identification as in Iskrev (2010). Most importantly, the authors explore the extent to which these weak identification problems affect the main economic takeaways and find that the identification deficiencies are not relevant for the standard BCA model. Finally, the authors compute some statistics of interest to practitioners of the BCA methodology.

Keywords: Business cycle accounting; identification; maximum likelihood estimation; C32; C51; C52; E27; E32; E37 (search for similar items in EconPapers)
Date: 2022
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Working Paper: On Identification Issues in Business Cycle Accounting Models (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aecozz:s0731-90532022000044a004

DOI: 10.1108/S0731-90532022000044A004

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