Sources of Business Cycle Fluctuations
AbstractWhat shocks account for the business cycle frequency and long run movements of output and prices? This paper addresses this question using the identifying assumption that only supply shocks, such as shocks to technology, oil prices, and labor supply affect output in the long run. Real and monetary aggregate demand shocks can affect output, but only in the short run. This assumption sufficiently restricts the reduced form of key macroeconomic variables to allow estimation of the shocks and their effect on output and price at all frequencies. Aggregate demand shocks account for about twenty to thirty percent of output fluctuations at business cycle frequencies. Technological shocks account for about one-quarter of cyclical fluctuations, and about one-third of output's variance at low frequencies. Shocks to oil prices are important in explaining episodes in the 1970's and 1980's. Shocks that permanently affect labor output account for the balance of fluctuations in output, namely, about half of its variance at all frequencies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 870.
Length: 61 pages
Date of creation: Apr 1988
Date of revision:
Publication status: Published in NBER Macroeconomics Annual (1988), 3: 111-148
Contact details of provider:
Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
More information through EDIRC
Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Other versions of this item:
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.:
- Clark, Peter K, 1987. "The Cyclical Component of U.S. Economic Activity," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 797-814, November.
- Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
- Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
- Quah, Danny, 1992.
"The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds,"
Econometric Society, vol. 60(1), pages 107-18, January.
- Danny Quah, 1991. "The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds," FMG Discussion Papers dp126, Financial Markets Group.
- Danny Quah, 1991. "The Relative Importance of Permanent and Transitory Components: Identi- fication and Some Theoretical Bounds," NBER Technical Working Papers 0106, National Bureau of Economic Research, Inc.
- Danny Quah, 1988. "The Relative Importance of Permanent and Transitory Components: Identification and Some Theoretical Bounds," Working papers 498, Massachusetts Institute of Technology (MIT), Department of Economics.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Glena Ames).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.