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The Role of Investment Wedges in the Carlstrom-Fuerst Economy and Business Cycle Accounting

Masaru Inaba and Kengo Nutahara

MPRA Paper from University Library of Munich, Germany

Abstract: Many researches that apply business cycle accounting (hereafter, BCA) to actual data conclude that models with investment frictions or investment wedges are not promising for modeling business cycle dynamics. In this paper, we apply BCA to artificial data generated by a variant model of Carlstrom and Fuerst (1997, American Economic Review), which is one of representative models with investment frictions. We find that BCA leads us to conclude that models of investment wedges are not promising according to the criteria of BCA, although the true model contains investment frictions.

Keywords: Business cycle accounting; investment wedge; investment friction; wedge decompsition (search for similar items in EconPapers)
JEL-codes: C68 E32 E13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-dge and nep-mac
Date: 2008-04-19
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https://mpra.ub.uni-muenchen.de/8337/1/MPRA_paper_8337.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/11582/3/MPRA_paper_11582.pdf revised version (application/pdf)

Related works:
Journal Article: The role of investment wedges in the Carlstrom-Fuerst economy and business cycle accounting (2009) Downloads
Working Paper: The Role of Investment Wedges in the Carlstrom-Fuerst Economy and Business Cycle Accounting (2009) Downloads
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