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Business cycle measurement with some theory

  • Fabio Canova
  • Matthias Paustian

A method to evaluate cyclical models not requiring 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. The method is used 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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File URL: https://econ-papers.upf.edu/papers/1203.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1203.

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Date of creation: Nov 2007
Date of revision: Jul 2011
Handle: RePEc:upf:upfgen:1203
Contact details of provider: Web page: http://www.econ.upf.edu/

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