Cyclical Properties of a Real Business Cycle Model.

Abstract

This paper tests the well-known real business cycle model of Kydland and Prescott (1988), using spectral methods for linear filters. Model spectra, coherencies, phase shifts, and correlations are tested against U.S. post-war data using both asymptotic and small-sample distributions. Compared with the model, the data have shorter business cycles, smaller co-movements of different macro variables, and less of a leading role for output. Copyright 1994 by John Wiley & Sons, Ltd.