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It is often assumed that wedges evolve according to VAR(1) in the applications of business cycle accounting (BCA). However, recent research finds that the wedges have no VAR(1) representation in many dynamic stochastic general equilibrium (DSGE) economies, and that there might be a...
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We apply business cycle accounting (BCA) to data generated by a representative model with investment wedges. Based on our findings, the criteria of BCA lead us to conclude that models with investment wedges are not promising for modeling business cycles.
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We investigate a monetary model in which the centralized market opens once, but the decentralized markets open twice in each period. We show that there may be multiple stationary equilibria.
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