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| Author: | Hoover, K. Salyer, K. |
| Title: | Technology shocks or coloured noise? Why real-business- cycle models cannot explain actual business cycles |
| Journal: | Review of Political Economy
1998 : JUL, VOL. 10:3, p. 299-328 |
| Index terms: | POLITICAL ECONOMY BUSINESS CYCLES TECHNOLOGY |
| Language: | eng |
| Abstract: | Typically real-business-cycle models are assessed by their ability to mimic the covariances and variances of actual business cycle data. Recently, however, advocates of RBC models have used them to fit the historical path of real GDP using the Solow residual as a driving process. The authors demonstrate that the success of RBC models at matching historical GDP data does not confirm the validity of RBC models. Through simulations they demonstrate that the Solow residual does not carry useful information about technology shocks and that the RBC model does not add incremental information about GDP. |
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