It is often assumed that wedges evolve according to the 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...

Many researches that apply business cycle accounting (hereafter, BCA) to actual data conclude that models with investment frictions or investment wedges are not promising for modeling business cycle dynamics. In this paper, we apply BCA to artificial data generated by a variant model of...

Many researches that apply business cycle accounting (hereafter, BCA) to actual data conclude that models with investment frictions or investment wedges are not promising for modeling business cycle dynamics. In this paper, we apply BCA to artificial data generated by a variant model of...