We provide a methodology to disentangle the long-run relation between variables from their own dynamics. Macroeconomic and aggregate financial series have a high degree of inertia. If this persistence is not properly accounted for, spurious correlations will give rise to paradoxes. Our procedure...

We introduce firm heterogeneity into the standard monopolistically-competitive Real Business Cycle (RBC) model. The fundamental equilibrium path is derived and the time series properties of aggregate GDP are studied analytically. Although firms' productivities are subject to temporary shocks,...