Output and Inflation Co-movement: An Update on Business-Cycle Stylized Facts
Electronic Access:
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Summary:
What are the drivers of business cycle fluctuations? And how many are there? By documenting strong and predictable co-movement of real variables during the business cycle in a sample of advanced economies, we argue that most business cycle fluctuations are driven by one major factor. The positive co-movement of real output and inflation convincingly argues for a demand story. We propose a simple statistic that can compare data and models. Based on this statistic, we show that the recent vintage of structural economic models has difficulties replicating the stylized facts we document.
Series:
Working Paper No. 2016/241
Subject:
Business cycles Econometric analysis Econometric models Economic growth Financial services Inflation Inflation targeting Monetary policy Prices Short term interest rates
English
Publication Date:
December 13, 2016
ISBN/ISSN:
9781475560329/1018-5941
Stock No:
WPIEA2016241
Pages:
37
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