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Do Equilibrium Real Business Cycle Theories Explain Post-War U.S. Business Cycles?

  • Martin S. Eichenbaum
  • Kenneth J. Singleton

This paper presents and interprets some rw evidence on the validity of the Real Business Cycle approach to business cycle analysis. The analysis is conducted in the context of a nnetary business cycle model which makes explicit one potential link between monetary policy and real allocations. This model is used to interpret Granger causal relations between nominal and real aggregates. Perhaps the nost striking empirical finding is that money growth does not Granger cause output growth in the context of several multivariate VARs and for various sample periods during the post war period in the U.S. Several possible reconciliations of this finding with both real and monetary business cycles models are discussed. We find that it is difficult to reconcile our npirical results with the view that exogenous monetary shocks were an important independent source of variation in output growth.

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File URL: http://www.nber.org/papers/w1932.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1932.

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Date of creation: May 1986
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Publication status: published as Eichenbaum, Martin and Kenneth J. Singleton. "Do Equilibrium Real Business Cycle Theories Explain Post-War U.S. Business Cycles?" NBER Macroeconomics Annual, ed. by S. Fischer, Vol. 1, pp. 91-134. Cambridge, MA: MIT Press, 1986.
Handle: RePEc:nbr:nberwo:1932
Note: EFG
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  1. Katharine G. Abraham & Lawrence F. Katz, 1987. "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances?," NBER Working Papers 1410, National Bureau of Economic Research, Inc.
  2. McCallum, Bennett T., 1983. "The role of overlapping-generations models in monetary economics," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 18(1), pages 9-44, January.
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  7. Svensson, Lars E O, 1985. "Money and Asset Prices in a Cash-in-Advance Economy," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 919-44, October.
  8. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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  13. McCallum, Bennett T, 1977. "Price-Level Stickiness and the Feasibility of Monetary Stabilization Policy with Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 627-34, June.
  14. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983. "Forecasting and Conditional Projection Using Realistic Prior Distributions," NBER Working Papers 1202, National Bureau of Economic Research, Inc.
  15. Miron, Jeffrey A, 1986. "Seasonal Fluctuations and the Life Cycle-Permanent Income Model of Consumption," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1258-79, December.
  16. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
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  18. Robert E. Lucas, Jr. & Nancy L. Stokey, 1985. "Money and Interest in a Cash-in-Advance Economy," NBER Working Papers 1618, National Bureau of Economic Research, Inc.
  19. Eichenbaum, Martin S & Hansen, Lars Peter & Singleton, Kenneth J, 1988. "A Time Series Analysis of Representative Agent Models of Consumption and Leisure Choice under Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 51-78, February.
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  29. repec:nbr:nberre:0126 is not listed on IDEAS
  30. Franco Modigliani, 1958. "New Developments on the Oligopoly Front," Journal of Political Economy, University of Chicago Press, vol. 66, pages 215.
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