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On the Role of Monetary Factors in Business Cycle Models
Published online by Cambridge University Press: 17 August 2016
Summary
Granger-causality tests and innovation analyses based on Vector Autoregression models seem to deny any role for monetary factors in generating and shaping business cycle fluctuations. The present paper shows that such empirical support for Real Business Cycle theories is flawed. In particular, it is demonstrated that an extended version of the Lucas paradigm can explain the existing evidence rather accurately, when changes in policy regimes are explicitly modelled.
Résumé
Les tests de causalité de Granger et les analyses d’innovation basées sur des modèles autoregressifs semblent nier tout rôle aux facteurs monétaires dans la genèse et la forme des variations cycliques. Notre article montre que ces méthodes empiriques ne confirment pas les théories de “Real Business Cycles”. En particulier, nous démontrons qu’une version large du paradigme de Lucas explique les faits de manière assez précise lorsque les changements de régimes sont explicite¬ment modélisés.
- Type
- Research Article
- Information
- Recherches Économiques de Louvain/ Louvain Economic Review , Volume 57 , Issue 1 , 1991 , pp. 3 - 19
- Copyright
- Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1991
Footnotes
We would like to thank, without implicating, Charlie Bean (LSE) and two anonymous referees for helpful comments and suggestions, and the C.N.R. (Consiglio Nazionale delle Ricerche) for financial support.
References
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