Christiano, Lawrence J.; Davis, Joshua M. - Federal Reserve Bank of Cleveland - 2006
Using “business cycle accounting,” Chari, Kehoe, and McGrattan (2006) conclude that models of financial frictions which … create a wedge in the intertemporal Euler equation are not promising avenues for modeling business cycle dynamics. There are … two reasons that this conclusion is not warranted. First, small changes in the implementation of business cycle accounting …