Abstract Recent empirical findings suggest that macroeconomic variables are seldom normally distributed. For example, the distributions of aggregate output growth-rate time series of many OECD countries are well approximated by symmetric exponential-power (EP) densities with Laplace fat tails. In this work, we assess whether real business cycle (RBC) and standard medium-scale New Keynesian (NK) models are able to replicate this statistical regularity. We simulate both models, drawing Gaussian- vs Laplace-distributed shocks, and we explore the statistical properties of simulated time series. Our results cast doubts on whether RBC and NK models are able to provide a satisfactory representation of the transmission mechanisms linking exogenous shocks to macroeconomic dynamics.

FAT-TAIL DISTRIBUTIONS AND BUSINESS-CYCLE MODELS

ASCARI, GUIDO;
2015-01-01

Abstract

Abstract Recent empirical findings suggest that macroeconomic variables are seldom normally distributed. For example, the distributions of aggregate output growth-rate time series of many OECD countries are well approximated by symmetric exponential-power (EP) densities with Laplace fat tails. In this work, we assess whether real business cycle (RBC) and standard medium-scale New Keynesian (NK) models are able to replicate this statistical regularity. We simulate both models, drawing Gaussian- vs Laplace-distributed shocks, and we explore the statistical properties of simulated time series. Our results cast doubts on whether RBC and NK models are able to provide a satisfactory representation of the transmission mechanisms linking exogenous shocks to macroeconomic dynamics.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11571/985484
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 46
  • ???jsp.display-item.citation.isi??? 39
social impact