Why Does Consumption Lead the Business Cycle?
Consumption in the US leads output at the business cycle frequency. Standard RBC models predict the opposite. We show in this paper that the lack of an endogenous propagation mechanism that can support demand shocks is responsible for the discrepancy between RBC theory and data.
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- Farmer Roger E. A. & Guo Jang-Ting, 1994.
"Real Business Cycles and the Animal Spirits Hypothesis,"
Journal of Economic Theory,
Elsevier, vol. 63(1), pages 42-72, June.
- Roger E.A. Farmer & Jang Ting Guo, 1992. "Real Business Cycles and the Animal Spirits Hypothesis," UCLA Economics Working Papers 680, UCLA Department of Economics.
- Timothy Cogley & James M. Nason, 1993.
"Output dynamics in real business cycle models,"
Working Papers in Applied Economic Theory
93-10, Federal Reserve Bank of San Francisco.
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