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Detrending and business cycle facts

  • Canova, Fabio

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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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 41 (1998)
Issue (Month): 3 (May)
Pages: 475-512

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Handle: RePEc:eee:moneco:v:41:y:1998:i:3:p:475-512
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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