Two flaws in business cycle accounting
By: Lawrence J.  Christiano, Joshua M. Davis
Contributors: Davis, Joshua M.; Federal Reserve Bank of Chicago. Research Department
Series: Working paper series -- WP-2006-10; Working paper series (Federal Reserve Bank of Chicago. Research Department : Online) -- WP-2006-10.
Publisher: Federal Reserve Bank of Chicago
Published: 2006
Place of publication: Chicago, Ill.]
Language: eng
Format: [electronic resource] /
Subjects: Business cycles; Econometric models
Description: "Using "business cycle accounting" (BCA), Chari, Kehoe and McGrattan (2006) (CKM) conclude that models of financial frictions which create a wedge in the intertemporal Euler equation are not promising avenues for modeling business cycle dynamics.  There are two reasons that this conclusion is not warranted.  First, small changes in the implementation of BCA overturn CKM's conclusions.  Second, one way that shocks to the intertemporal wedge impact on the economy is by their spillover effects onto other wedges.  This potentially important mechanism for the transmission of intertemporal wedge shocks is not identified under BCA.  CKM potentially understate the importance of these shocks by adopting the extreme position that spillover effects are zero"--Federal Reserve Bank of Chicago web site.
Notes: Title from PDF file as viewed on 11/13/2006.

Includes bibliographical references.

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