Granger causality and equilibrium business cycle theory

Postwar U.S. data show that consumption growth "Granger-causes" output and investment growth, which is puzzling if technology is the driving force of the business cycle. The author asks whether general equilibrium models with information frictions and non-technology shocks can rationalize the observed causal relationships. His conclusion is they cannot.

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Year of publication:	2007
Authors:	Wen, Yi
Published in:	Review. - Federal Reserve Bank of St. Louis. - 2007, May, v. 89, no. 3, p. 195-206
Publisher:	Federal Reserve Bank of St. Louis
Subject:	Business cycles

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Source:	RePEc - Research Papers in Economics

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