Business Cycle Accounting

  title={Business Cycle Accounting},
  author={V. V. Chari and Patrick J. Kehoe and Ellen R. McGrattan},
We propose a simple method to help researchers develop quantitative models of economic fluctuations. The method rests on the insight that many models are equivalent to a prototype growth model with time-varying wedges that resemble productivity, labor and investment taxes, and government consumption. Wedges that correspond to these variables—efficiency, labor, investment, and government consumption wedges—are measured and then fed back into the model so as to assess the fraction of various… CONTINUE READING
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