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Permanent and Transitory Components in Macroeconomic Fluctuations

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  • John Y. Campbell
  • N. Gregory Mankiw

Abstract

Fluctuations in real GNP have traditionally been viewed as transitory deviations from a deterministic time trend. The purpose of this paper is to review some of the recent developments that have led to a new view of output fluctuations and then to provide some additional evidence. Using post-war quarterly data, it is hard to reject the view that real GNP is as persistent as a random walk with drift. We also consider the hypothesis that the recent finding of persistence are due to the failure to distinguish the business cycle from other fluctuations in real GNP. We use the measured unemployment rate to decompose output fluctuations. We find no evidence for the view that business cycle fluctuations are more quickly trend-reverting.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2169.

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Date of creation: Feb 1987
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Publication status: published as Campbell, John and N. Gregory Mankiw. "American Economic Review, Vol. 77, No. 2, May 1987, pp. 111-117.
Handle: RePEc:nbr:nberwo:2169

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  1. Robert J. Barro & Mark Rush, 1979. "Unanticipated Money and Economic Activity," NBER Working Papers 0339, National Bureau of Economic Research, Inc.
  2. Finn Kydland & Edward C. Prescott, 1980. "A Competitive Theory of Fluctuations and the Feasibility and Desirability of Stabilization Policy," NBER Chapters, in: Rational Expectations and Economic Policy, pages 169-198 National Bureau of Economic Research, Inc.
  3. Blanchard, Olivier J, 1981. "What Is Left of the Multiplier Accelerator?," American Economic Review, American Economic Association, American Economic Association, vol. 71(2), pages 150-54, May.
  4. 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, Elsevier, vol. 7(2), pages 151-174.
  5. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, Elsevier, vol. 18(1), pages 49-75, July.
  6. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(5), pages 893-920, October.
  7. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 1057-72, June.
  8. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, Elsevier, vol. 10(2), pages 139-162.
  9. Clark, Peter K, 1987. "The Cyclical Component of U.S. Economic Activity," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(4), pages 797-814, November.
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  1. Efectos no neutrales en los shocks monetarios
    by Nicolas Cachanosky in Punto de Vista Economico on 2013-11-15 03:01:59
  2. Wanna bet some of that Nobel money?
    by Greg Mankiw in Greg Mankiw's Blog on 2009-03-04 11:45:00
  3. [??]????????…??
    by himaginary in himaginaryの日記 on 2009-03-06 08:00:00
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