Are Output Fluctuations Transitory?
AbstractAccording to the conventional view of the business cycle, fluctuations in output represent temporary deviations from trend. The purpose of this paper is to question this conventional view. If fluctuations in output are dominated by temporary deviations from the natural rate of output, then an unexpected change in output today should not substantially change one's forecast of output in, say, ten or twenty years. Our examination of quarterly post-war United States data leads us to be skeptical about this implication. We find that a unexpected change in real GNP of one percent should change one's forecast by over one percent over a long horizon. While it is obviously imprudent to make definitive judgments regarding theories on the basis of one stylized fact alone, we believe that the great persistence of output shocks documented in this paper is an important and often neglected feature of the data that should more widely be used for evaluating theories of economic fluctuations.
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Bibliographic InfoArticle provided by MIT Press in its journal Quarterly Journal of Economics.
Volume (Year): 102 (1987)
Issue (Month): 4 (November)
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Web page: http://mitpress.mit.edu/journals/
Other versions of this item:
- John Y. Campbell & N. Gregory Mankiw, 1988. "Are Output Fluctuations Transitory?," NBER Working Papers 1916, National Bureau of Economic Research, Inc.
- Campbell, John & Mankiw, Gregory, 1987. "Are Output Fluctuations Transitory?," Scholarly Articles 3122545, Harvard University Department of Economics.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Efectos no neutrales en los shocks monetarios
by Nicolas Cachanosky in Punto de Vista Economico on 2013-11-15 03:01:59
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