Why Does Consumption Lead the Business Cycle?

Yi Wen

Working Papers from Cornell University, Center for Analytic Economics

Abstract: Consumption in the US leads output at the business cycle frequency. Standard RBC models predict the opposite. We show in this paper that the lack of an endogenous propagation mechanism that can support demand shocks is responsible for the discrepancy between RBC theory and data.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:corcae:01-08

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