Discussion paper

DP782 Detrending and Business Cycle Facts

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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Citation

Canova, F (1993), ‘DP782 Detrending and Business Cycle Facts‘, CEPR Discussion Paper No. 782. CEPR Press, Paris & London. https://cepr.org/publications/dp782