Granger causality and equilibrium business cycle theory

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Granger causality and equilibrium business cycle theory

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Yi Wen

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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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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2005-038.

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Date of creation: 2006
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Publication status: Published in Federal Reserve Bank of St. Louis Review, May/June 2007, 89(3), pp. 195-205
Handle: RePEc:fip:fedlwp:2005-038

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Keywords: Business cycles;

Other versions of this item:

Article
- Yi Wen, 2007. "Granger causality and equilibrium business cycle theory," Review, Federal Reserve Bank of St. Louis, issue May, pages 195-206. [Downloadable!]
Paper
- Wen, Yi, 2001. "Granger Causality and Equilibrium Business Cycle Theory," Working Papers 01-07, Cornell University, Center for Analytic Economics. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-09-29 (All new papers)
NEP-DGE-2005-09-29 (Dynamic General Equilibrium)
NEP-MAC-2005-09-29 (Macroeconomics)

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:
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Other versions:
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Other versions:
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Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Discussion Paper / Institute for Empirical Macroeconomics 24, Federal Reserve Bank of Minneapolis. [Downloadable!]
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Other versions:
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Stephanie Schmitt-Grohe, 1999. "Endogenous business cycles and the dynamics of output, hours, and consumption," Departmental Working Papers 199915, Rutgers University, Department of Economics.
Other versions:
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- Stephanie Schmitt-Grohe, 1998. "Endogenous business cycles and the dynamics of output, hours, and consumption," Finance and Economics Discussion Series 1998-19, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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