Granger causality and equilibrium business cycle theory

Granger causality and equilibrium business cycle theory

by Wen

Part of Working paper ;

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"Post war US data show that consumption growth causes output and investment growth. This is puzzling if technology is the driving force of the business cycle. I ask whether general equilibrium models driven by demand shocks can rationalize the observed causal relations. My conclusion is that business cycle theory remains behind business cycle measurement"--Federal Reserve Bank of St. Louis web site.

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