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Do Equilibrium Real Business Cycle Theories Explain Post-War U.S. Business Cycles?

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Martin S. Eichenbaum
Kenneth J. Singleton

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Abstract

This paper presents and interprets some rw evidence on the validity of the Real Business Cycle approach to business cycle analysis. The analysis is conducted in the context of a nnetary business cycle model which makes explicit one potential link between monetary policy and real allocations. This model is used to interpret Granger causal relations between nominal and real aggregates. Perhaps the nost striking empirical finding is that money growth does not Granger cause output growth in the context of several multivariate VARs and for various sample periods during the post war period in the U.S. Several possible reconciliations of this finding with both real and monetary business cycles models are discussed. We find that it is difficult to reconcile our npirical results with the view that exogenous monetary shocks were an important independent source of variation in output growth.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1932.

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Date of creation: May 1986
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Handle: RePEc:nbr:nberwo:1932

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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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  19. King, Robert G & Plosser, Charles I, 1984. "Money, Credit, and Prices in a Real Business Cycle," American Economic Review, American Economic Association, vol. 74(3), pages 363-80, June. [Downloadable!] (restricted)
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  21. Jeffrey A. Miron, 1987. "Seasonal Fluctuations and the Life Cycle-Permanent Income Model of Consumption," NBER Working Papers 1845, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. Christopher A. Sims, 1980. "Comparison of Interwar and Postwar Business Cycles: Monetarism Reconsidered," NBER Working Papers 0430, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  23. Kang, Heejoon, 1985. "The Effects of Detrending in Granger Causality Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 344-49, October.
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(explanations, 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.)

  1. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Bennett T. McCallum, 1987. "On "Real" and "Sticky-Price" Theories of the Business Cycle," NBER Working Papers 1933, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Behzad T. Diba & Seonghwan Oh, 1988. "Have Money-Stock Fluctuations Had a Liquidity Effect on Expected Real Interest Rates," UCLA Economics Working Papers 534, UCLA Department of Economics. [Downloadable!]
  4. Gillman, Max & Nakov, Anton, 2005. "Granger Causality of the Inflation-Growth Mirror in Accession Countries," CEPR Discussion Papers 4845, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Mohammed I. Ansari & Ira. N Gang, 1999. "Liberalization Policy: ‘Fits & Starts' Or Gradual Change In India," Departmental Working Papers 199907, Rutgers University, Department of Economics. [Downloadable!]
  6. Darrell Duffie & Kenneth J. Singleton, 1990. "Simulated Moments Estimation of Markov Models of Asset Prices," NBER Technical Working Papers 0087, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Michael P. Keane, 1990. "Sectoral shift theories of unemployment: evidence from panel data," Discussion Paper / Institute for Empirical Macroeconomics 28, Federal Reserve Bank of Minneapolis. [Downloadable!]
  8. Bennett T. McCallum, 2002. "Recent developments in monetary policy analysis: the roles of theory and evidence," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 67-96. [Downloadable!]
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  9. Thomas F. Cooley & Gary D. Hansen, 1987. "The Inflation Tax in a Real Business Cycle Model," UCLA Economics Working Papers 496, UCLA Department of Economics. [Downloadable!]
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  10. Chan Huh & Bharat Trehan, 1991. "Real business cycles: a selective survey," Economic Review, Federal Reserve Bank of San Francisco, issue Spr, pages 3-17. [Downloadable!]
  11. Benjamin M. Friedman & Kenneth N. Kuttner, 1994. "Another Look at the Evidence on Money-Income Causality," NBER Working Papers 3856, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Lawrence J Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "How do Canadian hours worked respond to a technology shock?," International Finance Discussion Papers 774, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  13. Daniel Stavárek, 2005. "Stock Prices and Exchange Rates in the EU and the United States: Evidence on their Mutual Interactions (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 55(3-4), pages 141-161, March. [Downloadable!]
  14. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers 768, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  15. Charles I. Plosser, 1991. "Money and Business Cycles: A Real Business Cycle Interpretation," NBER Working Papers 3221, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Pentti Pikkarainen & Matti Virén, 1989. "Granger causality between money, output, prices and interest rates: Some cross-country evidence from the period 1875–1984," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 125(1), pages 74-82, March. [Downloadable!] (restricted)
  17. James H. Stock & Mark W. Watson, 1987. "Interpreting Evidence on Money-Income Causality," NBER Working Papers 2228, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. Benjamin M. Friedman & Kenneth N. Kuttner, 1992. "Money, Income and Prices After the 1980s," NBER Working Papers 2852, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  20. Stavarek, Daniel, 2004. "Stock Prices and Exchange Rates in the EU and the USA: Evidence of their Mutual Interactions," MPRA Paper 7297, University Library of Munich, Germany. [Downloadable!]
  21. Valerie A. Ramey, 1991. "The Source of Fluctuations in Money: Evidence From Trade Credit," NBER Working Papers 3756, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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