On identification issues in business cycle accounting models

Pedro Brinca, Nikolay Iskrev, Francesca Loria

Research output: Working paper

Abstract

Since its introduction by Chari et al. (2007), Business Cycle Accounting (BCA)
exercises have become widespread. Much attention has been devoted to the results of such exercises and to methodological departures from the baseline methodology.
Little attention has been paid to identification issues within these classes of models.In this paper we investigate whether such issues are of concern in the original methodology and in an extension proposed by Sustek (2011) called Monetary BCA. ˇ
We resort to two types of identification tests in population. One concerns strict identification as theorized by Komunjer and Ng (2011) while the other deals both with strict and weak identification as in Iskrev (2015). Most importantly, we explore the extent to which these weak identification problems affect the main economic takeaways and find that the identification deficiencies are not relevant for the standard BCA model. Finally, we compute some statistics of interest to practitioners of the BCA methodology.
Original languageEnglish
Pages1-79
Publication statusPublished - 2018

Publication series

NameMPRA Munich Personal RePEc Archive
No.90250

Keywords

  • Business Cycle Accounting
  • Identification
  • Maximum Likelihood Estimation

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  • Cite this

    Brinca, P., Iskrev, N., & Loria, F. (2018). On identification issues in business cycle accounting models. (pp. 1-79). (MPRA Munich Personal RePEc Archive; No. 90250).