Fat-Tail Distributions and Business-Cycle Models ∗

  title={Fat-Tail Distributions and Business-Cycle Models ∗},
  author={Guido Ascari and Giorgio Fagiolo and Andrea Roventini},
Recent empirical findings suggest that macroeconomic variables are seldom normally distributed. For example, the distributions of aggregate output growth-rate time series of many OECD countries are well approximated by symmetric exponential-power (EP) densities, with Laplace fat tails. In this work, we assess whether Real Business Cycle (RBC) and standard medium-scale New-Keynesian (NK) models are able to replicate this statistical regularity. We simulate both models drawing Gaussianvs Laplace… CONTINUE READING
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