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The Dynamic Effects of Aggregate Demand and Supply Disturbances

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  • Blanchard, Olivier Jean
  • Quah, Danny

Abstract

The authors interpret fluctuations in GNP and unemployment as due to two types of disturbances: disturbances that have a permanent effect on output and disturbances that do not. They interpret the first as supply disturbances, the second as demand disturbances. Demand disturbances have a hump-shaped, mirror-image effect on output and unemployment. The effect of supply disturbances on output increases steadily over time, peaking after two years and reaching a plateau after five years. Copyright 1989 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 79 (1989)
Issue (Month): 4 (September)
Pages: 655-73

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Handle: RePEc:aea:aecrev:v:79:y:1989:i:4:p:655-73

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References

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  1. Matthew Shapiro & Mark Watson, 1988. "Sources of Business Cycles Fluctuations," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156 National Bureau of Economic Research, Inc.
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  7. Danny Quah, 1991. "The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds," FMG Discussion Papers dp126, Financial Markets Group.
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  9. Campbell, John Y & Mankiw, N Gregory, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 857-80, November.