The Malmquist Index and its Implications for Business Cycle Analysis
نویسنده
چکیده
Most Real Business Cycle (RBC) models use the Solow residual as a proxy for a measured aggregate productivity shock. This paper studies implications of the Malmquist productivity index for business cycle analysis using a standard RBC model. By doing this, the study seeks to broaden areas of macroeconomic applications for the Malmquist index. More specifically, this paper chooses aggregate productivity shock parameters primarily based on the Malmquist index without relying on the Solow residual and assesses its quantitative effectiveness of this approach. The study finds that the RBC model based on the Malmquist index successfully replicates standard business cycle features documented in the existing literature. Finally, this paper discusses potential benefits from using the Malmquist index in the RBC research. JEL Classification: O47; E30
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