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The Role of Investment Wedges in the Carlstrom-Fuerst Economy and Business Cycle Accounting

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Listed:
  • INABA Masaru
  • NUTAHARA Kengo
Abstract
Many researches that apply business cycle accounting (hereafter, BCA) to actual data conclude that models with investment frictions or investment wedges are not promising for modeling business cycle dynamics. In this paper, we apply BCA to artificial data generated by a variant model of Carlstrom and Fuerst (1997, American Economic Review), which is one of the representative models with investment frictions. Based on our findings, BCA leads us to conclude that models with investment wedges are not promising according to the criteria of BCA, even though the true model contains investment frictions.

Suggested Citation

  • INABA Masaru & NUTAHARA Kengo, 2009. "The Role of Investment Wedges in the Carlstrom-Fuerst Economy and Business Cycle Accounting," Discussion papers 09030, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:09030
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    Cited by:

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    2. Shirai, Daichi, 2016. "Persistence and Amplification of Financial Frictions," MPRA Paper 72187, University Library of Munich, Germany.
    3. Matheus Cardoso Leal & Marcio Issao Nakane, 2022. "Brazilian economy in the 2000’s: A tale of two recessions," Working Papers, Department of Economics 2022_20, University of São Paulo (FEA-USP).
    4. Pedro Brinca & João Ricardo Costa Filho & Francesca Loria, 2024. "Business cycle accounting: What have we learned so far?," Journal of Economic Surveys, Wiley Blackwell, vol. 38(4), pages 1276-1316, September.
    5. Otsu Keisuke, 2010. "A Neoclassical Analysis of the Asian Crisis: Business Cycle Accounting for a Small Open Economy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-39, July.

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    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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