NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do Equilibrium Real Business Cycle Theories Explain Post-War U.S. Business Cycles?

Martin S. Eichenbaum, Kenneth J. Singleton

NBER Working Paper No. 1932
Issued in May 1986
NBER Program(s):   EFG

This paper presents and interprets some rw evidence on the validity of

the Real Business Cycle approach to business cycle analysis. The analysis is

conducted in the context of a nnetary business cycle model which makes

explicit one potential link between monetary policy and real allocations.

This model is used to interpret Granger causal relations between nominal and

real aggregates. Perhaps the nost striking empirical finding is that money

growth does not Granger cause output growth in the context of several

multivariate VARs and for various sample periods during the post war period in

the U.S. Several possible reconciliations of this finding with both real and

monetary business cycles models are discussed. We find that it is difficult

to reconcile our npirical results with the view that exogenous monetary

shocks were an important independent source of variation in output growth.

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Document Object Identifier (DOI): 10.3386/w1932

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