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Macroeconomic Shocks and the Business Cycle: Evidence from a Structural Factor Model fiscal

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  • Mario Forni
  • Luca Gambetti

Abstract

We obtain the following results. (ii) Both supply and demand shocks are important sources of fluctuations; supply prevails for GDP, while demand prevails for employment and information. (ii) Policy matters: Both monetary and fiscal policy shocks have sizeable effects on output and prices, with little evidence of crowding out; both monetary and fiscal authorities implement important systematic countercyclical policies reacting to demand shocks. (iii) Negative demand shocks have a large long-run positive effect on productivity, consistently with the Schumpeterian cleansing view of recessions

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 440.

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Date of creation: Mar 2010
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Handle: RePEc:bge:wpaper:440

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Keywords: Structural factor model; Sign restrictions; Monetary policy; Fiscal policy; Demand; Supply;

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References

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    • Domenico Giannone & Lucrezia Reichlin & Luca Sala, 2005. "Monetary Policy in Real Time," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 161-224 National Bureau of Economic Research, Inc.
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Cited by:
  1. Christiane Baumeister & Philip Liu & Haroon Mumtaz, 2012. "Changes in the Effects of Monetary Policy on Disaggregate Price Dynamics," Working Papers 12-13, Bank of Canada.
  2. Matteo Luciani & Antoniomaria Conti & Matteo Barigozzi, 2013. "Do Euro Area Countries Respond Asymmetrically to the Common Monetary Policy?," ULB Institutional Repository 2013/153330, ULB -- Universite Libre de Bruxelles.

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