Business cycle measurement with some theory

Fabio Canova and Matthias Paustian

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: A method to evaluate cyclical models not requiring 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. The method is used to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers) in a standard class of models.

Keywords: Sign restrictions; shock identification; model validation; misspecification. (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2007-11, Revised 2011-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (200)

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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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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1203

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