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Detrending and Business Cycle Facts

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  • Canova, Fabio

Abstract

This paper examines the business cycle properties of a small set of real US macroeconomic time series using a variety of detrending methods. It is shown: (i) that both quantitatively and qualitatively `stylized facts' of US business cycles vary widely across detrending methods; (ii) that alternative detrending filters extract different types of information from the original series; and (iii) the qualitative response of consumption, investment, hours and productivity to a typical shock in GNP have, depending on the method used, two types of patterns -- one consistent with a Real Business Cycle model and one consistent with a Neo-Keynesian labour-hoarding story. Implications and suggestions for current macroeconomic practice are also presented.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 782.

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Date of creation: Jun 1993
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Handle: RePEc:cpr:ceprdp:782

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Keywords: Business Cycles; Detrending; Filters; Labour Hoarding; Stylized Facts; Technology Shocks;

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References

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