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Detrending and business cycle facts

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  • Canova, Fabio

Abstract

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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  • Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May.
    • Handle: RePEc:eee:moneco:v:41:y:1998:i:3:p:475-512
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    More about this item

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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