The paper analyzes the question why the U.S. economy in the 2000:4-2004:3 period was sluggish in light of the large expansionary fiscal and monetary policies that took place. The answer does not appear to be that there were large structural changes in the economy or systematic bad shocks. This paper tests for such changes and shocks, and the results are generally negative. Instead, the main culprits seem to be large negative effects from declines in the stock market and exports. Although not tested in this paper, some of the decline in exports may be the result of the stock market decline, in which case most of the explanation is simply the stock market decline itself.
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Length: 35 pages Date of creation: Jan 2005 Date of revision: Publication status: Published in Topics in Macroeconomics (2005), 5(1): Article 19 Handle: RePEc:cwl:cwldpp:1497
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
D. W. K. Andrews, 2003.
"End-of-Sample Instability Tests,"
Econometrica,
Econometric Society, vol. 71(6), pages 1661-1694, November.
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