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.