On the Interpretation of Near Random-Walk Behavior in GNP

Kenneth West ()

No 2364, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: It is shown that GNP will have an autoregressive root very close to unity in a variant of Taylor's (1980a,b) overlapping wage contracts model, for stylized versions of simple money supply rules and plausible values for the model's parameters. In this variant, monetary policy is the only reason for serial correlation in GNP. It is premature, therefore, to conclude, as some authors, have, that the presence of such a root in U.S. GNP is inconsistent with either a stationary natural rate or with nominal shocks playing a major role in the business cycle.

Date: 1987-08
Note: EFG
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Citations: View citations in EconPapers (4)

Published as American Economic Review, Vol. 78, No. 1, March 1988, pp. 202-209.

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