| Author Name | INABA Masaru (The Canon Institute for Global Studies) /NUTAHARA Kengo (Senshu University) |
|---|---|
| Creation Date/NO. | June 2009 09-E-030 |
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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.
