On the Interdependence of Business Cycles and Economic Growth: The Case of Growth Hysteresis
AbstractThe purpose of this paper is to give an empirical answer to two related but different questions: First, are economic growth and business cycles interdependent? Second, is money neutral even in the long run? Using data from the United States, this paper finds (using a VAR model) and presents evidence for the interdependence hypothesis, and against the long-run money neutrality hypothesis. The results suggest that counter- cyclical growth models best capture the main channel of influence between cycles and growth. A policy implication is that, if money affects the cycle, it is not neutral even in the long run, and a positive monetary shock may result in hysteresis, having negative growth consequences.
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Bibliographic InfoPaper provided by EconWPA in its series Development and Comp Systems with number 0509015.
Length: 23 pages
Date of creation: 15 Sep 2005
Date of revision:
Note: Type of Document - doc; pages: 23
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Business Cycles; Growth; Money Neutrality;
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-29 (All new papers)
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