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Granger causality and equilibrium business cycle theory

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  • Yi Wen

Abstract

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.

Suggested Citation

  • Yi Wen, 2007. "Granger causality and equilibrium business cycle theory," Review, Federal Reserve Bank of St. Louis, vol. 89(May), pages 195-206.
    • Handle: RePEc:fip:fedlrv:y:2007:i:may:p:195-206:n:v.89no.3
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    References listed on IDEAS

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    Cited by:

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    2. Pedrosa, Ítalo & Brochier, Lídia & Freitas, Fabio, 2023. "Debt hierarchy: Autonomous demand composition, growth and indebtedness in a Supermultiplier model," Economic Modelling, Elsevier, vol. 126(C).
    3. Chikán, Attila & Kovács, Erzsébet & Matyusz, Zsolt & Sass, Magdolna & Vakhal, Péter, 2016. "Long-term trends in inventory investment in traditional market and post-socialist economies," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 14-23.

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    More about this item

    Keywords

    Business cycles;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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