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Permanent and Transitory Shocks in Real Output: Estimates from Nineteenth-Century and Postwar Economies

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  • Keating, John W
  • Nye, John V

Abstract

This paper reexamines Olivier J. Blanchard and Danny Quah's (1989) aggregate supply/demand model interpretation of output shocks using data from ten countries. Although postwar data support their interpretation, the model is not supported by nineteenth=century data. In the postwar period, permanent output shocks cause the price level to move in the opposite direction (like supply shocks) and temporary output shocks cause the price level to move in the same direction (like demand shocks). But with pre-World War I data, permanent output shocks typically cause price level movements in the same direction. The results are systematic and cannot be explained by data problems.

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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 30 (1998)
Issue (Month): 2 (May)
Pages: 231-51

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Handle: RePEc:mcb:jmoncb:v:30:y:1998:i:2:p:231-51

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Steven Morling, 2002. "Output Adjustment in Developing Countries: a Structural Var Approach," Discussion Papers Series 307, School of Economics, University of Queensland, Australia.
  2. John W. Keating, 2013. "Interpreting Permanent Shocks to Output When Aggregate Demand May Not Be Neutral in the Long Run," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(4), pages 747-756, 06.
  3. Keating, John & Valcarcel, Victor, 2012. "Greater moderations," Economics Letters, Elsevier, vol. 115(2), pages 168-171.
  4. Keating, John W. & Nye, John V., 1999. "The Dynamic Effects of Aggregate Demand and Supply Disturbances in the G7 Countries," Journal of Macroeconomics, Elsevier, vol. 21(2), pages 263-278, April.
  5. Michael D. Bordo & Angela Redish, 2003. "Is Deflation depressing? Evidence from the Classical Gold Standard," NBER Working Papers 9520, National Bureau of Economic Research, Inc.
  6. Alfonso Mendoza Velázquez & Peter N. Smith, 2013. "Equity Returns and the Business Cycle: The Role of Supply and Demand Shocks," CAMA Working Papers 2013-22, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  7. Beckworth, David, 2007. "The postbellum deflation and its lessons for today," The North American Journal of Economics and Finance, Elsevier, vol. 18(2), pages 195-214, August.
  8. Valcarcel, Victor J. & Wohar, Mark E., 2013. "Changes in the oil price-inflation pass-through," Journal of Economics and Business, Elsevier, vol. 68(C), pages 24-42.
  9. Kevin Lee & Kalvinder Shields, . "Information, Business Survey Forecasts and Measurement of Output Trends in Six European Economies," Discussion Papers in European Economics 99/7, Department of Economics, University of Leicester.
  10. António Portugal Duarte & João Sousa Andrade, 2004. "How the Gold Standard Functioned in Portugal: An Analysis of Some Macroeconomic Aspects," GEMF Working Papers 2004-01, GEMF - Faculdade de Economia, Universidade de Coimbra.
  11. Bordo, Michael D. & Jonung, Lars, 1994. "Monetary Regimes, Inflation and Monetary Reform: An Essay in Honor of Axel Leijonhufvud," Working Paper Series in Economics and Finance 16, Stockholm School of Economics.
  12. Keating, John W., 2000. "Macroeconomic Modeling with Asymmetric Vector Autoregressions," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 1-28, January.
  13. Keating, John W., 2013. "What do we learn from Blanchard and Quah decompositions of output if aggregate demand may not be long-run neutral?," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 203-217.
  14. John W. Keating, 2013. "What Do We Learn from Blanchard and Quah Decompositions If Aggregate Demand May Not be Long-Run Neutral?," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201302, University of Kansas, Department of Economics.
  15. Ivanov, Ventzislav & Kilian, Lutz, 2001. "A Practitioner's Guide to Lag-Order Selection for Vector Autoregressions," CEPR Discussion Papers 2685, C.E.P.R. Discussion Papers.
  16. John Keating, 2004. "Interpreting Permanent and Transitory Shocks to Output When Aggregate Demand May Not Be Neutral in the Long-run," Econometric Society 2004 North American Summer Meetings 608, Econometric Society.
  17. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.
  18. William Miles, 2003. "Fixed exchange rates and sticky prices in emerging markets," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(5), pages 575-586.

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