Granger Causality and Equilibrium Business Cycle Theory
FRB of St. Louis Working Paper No. 2005-038B
17 Pages Posted: 13 Dec 2006
Date Written: December 2006
Abstract
Post-war US data show that consumption growth Granger causes output and investment growth. This is puzzling if technology is the driving force of the business cycle. I ask whether general equilibrium models with information frictions and non-technology shocks can rationalize the observed causal relations. My conclusion is they cannot.
Keywords: Granger Causality, Real Business Cycle, Aggregate Demand, Inventories
JEL Classification: E13, E32
Suggested Citation: Suggested Citation
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