2016 – “Accounting for Business Cycles”

Joint with V.V. Chari, P.J. Kehoe, E. McGrattan, Chapter 13 – Accounting for Business Cycles, In: John B. Taylor and Harald Uhlig, Editor(s), Handbook of Macroeconomics, Elsevier, 2016, Volume 2, Pages 1013-1063, ISSN 1574-0048, ISBN 9780444594877

Abstract: We elaborate on the business cycle accounting method proposed by Chari et al. (2006), clear up some misconceptions about the method, and then apply it to compare the Great Recession across OECD countries as well as to the recessions of the 1980s in these countries. We have four main findings. First, with the notable exception of the United States, Spain, Ireland, and Iceland, the Great Recession was driven primarily by the efficiency wedge. Second, in the Great Recession, the labor wedge plays a dominant role only in the United States, and the investment wedge plays a dominant role in Spain, Ireland, and Iceland. Third, in the recessions of the 1980s, the labor wedge played a dominant role only in France, the United Kingdom, and Belgium. Finally, overall in the Great Recession, the efficiency wedge played a more important role and the investment wedge played a less important role than they did in the recessions of the 1980s.

Access here: http://dx.doi.org/10.1016/bs.hesmac.2016.05.002

A working paper version is available as a Minneapolis Fed Staff Report and can be accessed here. Access a short version of the technical appendix here. The long version of the technical appendix together with instructions for replication, can be accessed here. The replication files can be downloaded here (about 400MBs in RAR format).