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The Source of Historical Economic Fluctuations: An Analysis using Long-Run Restrictions

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  • Neville Francis
  • Valerie A. Ramey

Abstract

This paper investigates the source of historical fluctuations in annual US data extending back to the late 19th century. Long-run identifying restrictions are used to decompose productivity, hours, and output into technology shocks and non-technology shocks. A variety of models with differing auxiliary assumptions are investigated. The preferred model suggests that the Great Depression was a period in which both types of shocks were very negative. On the other hand, our estimates support the microeconomic evidence of historically large positive technology shocks from 1934 to 1936. Finally, both types of shocks are responsible for the reduction in the variance of output in the post-WWII period.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10631.

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Date of creation: Jul 2004
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Publication status: published as The Source of Historical Economic Fluctuations: An Analysis Using Long-Run Restrictions , Neville Francis, Valerie A. Ramey. in NBER International Seminar on Macroeconomics 2004 , Clarida, Frankel, Giavazzi, and West. 2006
Handle: RePEc:nbr:nberwo:10631

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  17. Neville Francis & Michael T. Owyang & Athena T. Theodorou, 2003. "The use of long-run restrictions for the identification of technology shocks," Working Papers 2003-010, Federal Reserve Bank of St. Louis.
  18. Harold L. Cole & Lee E. Ohanian, 2001. "New Deal policies and the persistence of the Great Depression: a general equilibrium analysis," Working Papers 597, Federal Reserve Bank of Minneapolis.
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