Is autonomous demand really autonomous in the United States? An asymmetric frequency‐domain Granger causality approach

Abstract

We test whether the growth rate of autonomous demand determines the growth rate of output in the United States. We apply asymmetric frequency‐domain Granger causality tests. We find that negative and positive shocks in the growth rate of autonomous demand unidirectionally Granger‐cause negative and positive shocks in the growth rate of output, respectively. These results apply in the short and in the long run. Our results are important because, unlike the existing empirical literature on autonomous demand‐led growth, they validate the autonomy of autonomous demand in the short and in the long run; which is key for the consistency of the supermultiplier model.

Income distribution and economic activity: A frequency domain causal exploration

“…Recent examples of applications in this area include Strohsal et al. (2019) and Pérez‐Montiel and Manera (2022), who apply related methods to questions concerning financial cycles and supermultiplier theory, respectively.…”

Critical globalisation: Productive capacity and capital productivity in the United States, 1945–2020

“…The weight of imports over GDP remained stable at around 2.5% and 3% until the late sixties; however, by the end of the 1980s, it was already 8%, reaching 16% in 2009. The behaviour of exports (which, to a certain extent, can be considered autonomous (Girardi and Pariboni 2016;Pérez-Montiel and Manera 2022) is not sufficiently dynamic to offset the increase in imports; thus, since the end of the 1970s, the trade balance becomes negative.…”

Growth, cycles, and residential investment

“…The authors find a short-run bidirectional Granger causality, and support for a long-run effect of autonomous demand on US GDP growth. A similar research design is adopted in Pérez-Montiel and Erbina (2020), Haluska et al (2021), andManera (2021). These papers find support for SSM approach, but cannot speak to the implicit prediction of cyclicality.…”