Citation

Discussion Paper Details

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Title: Detrending and Business Cycle Facts

Author(s): Fabio Canova

Publication Date: June 1993

Keyword(s): Business Cycles, Detrending, Filters, Labour Hoarding, Stylized Facts and Technology Shocks

Programme Area(s): International Macroeconomics

Abstract: This paper examines the business cycle properties of a small set of real US macroeconomic time series using a variety of detrending methods. It is shown: (i) that both quantitatively and qualitatively `stylized facts' of US business cycles vary widely across detrending methods; (ii) that alternative detrending filters extract different types of information from the original series; and (iii) the qualitative response of consumption, investment, hours and productivity to a typical shock in GNP have, depending on the method used, two types of patterns -- one consistent with a Real Business Cycle model and one consistent with a Neo-Keynesian labour-hoarding story. Implications and suggestions for current macroeconomic practice are also presented.

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Bibliographic Reference

Canova, F. 1993. 'Detrending and Business Cycle Facts'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=782