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Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S

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  • Matthias Gubler

    ()

  • Matthias S. Hertweck

    () (University of Basel)

Abstract

This paper develops a 9-dimensional SVAR to investigate the sources of the U.S. business cycle. We extend the standard set of identified shocks to include unexpected changes in commodity prices. Our main result is that commodity price shocks are a very important driving force of macroeconomic fluctuations, second only to investment-specific technology shocks. In particular, we find that commodity price shocks explain a large share of cyclical movements in inflation. Neutral technology shocks and monetary policy shocks seem less relevant at business cycle frequencies. The impulse response dynamics provide support for medium-scale DSGE models, but not for strong price rigidities.

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Bibliographic Info

Paper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2011/05.

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Date of creation: 2011
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Handle: RePEc:bsl:wpaper:2011/05

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Keywords: business cycles; commodity price shocks; structural VAR;

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  1. Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit Postwar U.S. Data?," IMF Working Papers 04/234, International Monetary Fund.
  2. Di Pace, F. & Faccini, R., 2012. "Deep habits and the cyclical behaviour of equilibrium unemployment and vacancies," Journal of Economic Dynamics and Control, Elsevier, vol. 36(2), pages 183-200.
  3. Ordóñez, Javier & Sala, Hector & Silva, José I., 2010. "Oil Price Shocks and Labor Market Fluctuations," IZA Discussion Papers 5096, Institute for the Study of Labor (IZA).
  4. Reinout De Bock, 2007. "Investment-Specific Technology Shocks and Labor Market Frictions," Working Paper Research 108, National Bank of Belgium.
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Cited by:
  1. Jun Nagayasu, 2013. "A dynamic factor approach to domestic capital mobility," Empirical Economics, Springer, vol. 44(2), pages 685-700, April.

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