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Granger causality and equilibrium business cycle theory

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  • Yi Wen

Abstract

Post-war US data show that consumption growth \"Granger causes\" output and investment growth. This is puzzling if technology is the driving force of the business cycle. I ask whether general equilibrium models with information frictions and non-technology shocks can rationalize the observed causal relations. My conclusion is they cannot.

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  • Yi Wen, 2006. "Granger causality and equilibrium business cycle theory," Working Papers 2005-038, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:2005-038
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    Cited by:

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    2. Chikán, Attila & Kovács, Erzsébet & Matyusz, Zsolt & Sass, Magdolna & Vakhal, Péter, 2016. "Long-term trends in inventory investment in traditional market and post-socialist economies," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 14-23.
    3. Dressler, Scott J. & Li, Victor E., 2009. "Inside money, credit, and investment," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 970-984, April.

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    More about this item

    Keywords

    Business cycles;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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