Title: Output and Inflation Co-Movement: An Update on Business-Cycle Stylized Facts
Abstract: What are the drivers of business cycle fluctuations? And how many are there? Bydocumenting strong and predictable co-movement of real variables during the business cyclein a sample of advanced economies, we argue that most business cycle fluctuations aredriven by one major factor. The positive co-movement of real output and inflationconvincingly argues for a demand story. We propose a simple statistic that can compare dataand models. Based on this statistic, we show that the recent vintage of structural economicmodels has difficulties replicating the stylized facts we document.
Publication Year: 2016
Publication Date: 2016-12-01
Language: en
Type: article
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