Business cycle measurement with some theory
Fabio Canova () and
No 8364, CEPR Discussion Papers from C.E.P.R. Discussion Papers
A method to evaluate cyclical models which does not require 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. We show how to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers) in a standard class of models.
Keywords: misspecification; model validation; shock identification; sign restrictions (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
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Journal Article: Business cycle measurement with some theory (2011)
Working Paper: Business cycle measurement with some theory (2011)
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