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, five or ten years. Our examination of quarterly postwar United States data leads us to be skeptical about this implication. The data suggest that an unexpected change in real GNP of 1 percent should change one's forecast by over 1 percent over a long horizon.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3122545.
Date of creation: 1987
Date of revision:
Publication status: Published in Quarterly Journal of Economics
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