Granger causality and equilibrium business cycle theory

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Granger causality and equilibrium business cycle theory

Author Info

Yi Wen

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Yi Wen

Abstract

Postwar U.S. data show that consumption growth "Granger-causes" output and investment growth, which is puzzling if technology is the driving force of the business cycle. The author asks whether general equilibrium models with information frictions and non-technology shocks can rationalize the observed causal relationships. His conclusion is they cannot.

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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2007)
Issue (Month): May ()
Pages: 195-206
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Handle: RePEc:fip:fedlrv:y:2007:i:may:p:195-206:n:v.89no.3

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Paper
- Yi Wen, 2006. "Granger causality and equilibrium business cycle theory," Working Papers 2005-038, Federal Reserve Bank of St. Louis. [Downloadable!]

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Other versions:
- Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Working Paper Series, Macroeconomic Issues 90, Federal Reserve Bank of Chicago.
Farmer Roger E. A. & Guo Jang-Ting, 1994. "Real Business Cycles and the Animal Spirits Hypothesis," Journal of Economic Theory, Elsevier, vol. 63(1), pages 42-72, June. [Downloadable!] (restricted)
Other versions:
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Other versions:
- Schmitt-Grohé, Stephanie, 1999. "Endogenous Business Cycles and the Dynamics of Output, Hours, and Consumption," CEPR Discussion Papers 2315, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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