Inaba, Masaru; Nutahara, Kengo - In: Review of Economic Dynamics 15 (2012) 2, pp. 265-269
It is often assumed that wedges evolve according to VAR(1) in the applications of business cycle accounting (BCA). However, recent research finds that the wedges have no VAR(1) representation in many dynamic stochastic general equilibrium (DSGE) economies, and that there might be a...