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Business cycle measurement with some theory

Listed author(s):
  • Canova, Fabio
  • Paustian, Matthias

A method to evaluate cyclical models which does not require knowledge of the DGP and the exact specification of the aggregate decision rules is proposed. We derive robust restrictions in a class of models; use some to identify structural shocks in the data and others to evaluate the class or contrast sub-models. The approach has good properties, even in small samples, and when the class of models is misspecified. We show how to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers) in a standard class of models.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8364.

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Date of creation: Apr 2011
Handle: RePEc:cpr:ceprdp:8364
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