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The Dynamic Effects of Aggregate Demand and Supply Disturbances

  • Blanchard, Olivier Jean
  • Quah, Danny

The authors interpret fluctuations in GNP and unemployment as due to two types of disturbances: disturbances that have a permanent effect on output and disturbances that do not. They interpret the first as supply disturbances, the second as demand disturbances. Demand disturbances have a hump-shaped, mirror-image effect on output and unemployment. The effect of supply disturbances on output increases steadily over time, peaking after two years and reaching a plateau after five years. Copyright 1989 by American Economic Association.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 79 (1989)
Issue (Month): 4 (September)
Pages: 655-73

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Handle: RePEc:aea:aecrev:v:79:y:1989:i:4:p:655-73
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  1. Lawrence J. Christiano, 1988. "Searching For a Break in GNP," NBER Working Papers 2695, National Bureau of Economic Research, Inc.
  2. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," Cowles Foundation Discussion Papers 870, Cowles Foundation for Research in Economics, Yale University.
  3. Mankiw, N. Gregory & Campbell, John, 1987. "Permanent and Transitory Components in Macroeconomic Fluctuations," Scholarly Articles 3207697, Harvard University Department of Economics.
  4. 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.
  5. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Francis X. Diebold & Glenn D. Rudebusch, 1988. "Long memory and persistence in aggregate output," Finance and Economics Discussion Series 7, Board of Governors of the Federal Reserve System (U.S.).
  7. repec:nbr:nberre:0126 is not listed on IDEAS
  8. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
  9. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  10. Clark, Peter K., 1989. "Trend reversion in real output and unemployment," Journal of Econometrics, Elsevier, vol. 40(1), pages 15-32, January.
  11. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
  12. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
  13. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  14. 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.
  15. John Y. Campbell & N. Gregory Mankiw, 1986. "Are Output Fluctuations Transitory?," NBER Working Papers 1916, National Bureau of Economic Research, Inc.
  16. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1, September.
  17. Olivier J. Blanchard & Mark W. Watson, 1986. "Are Business Cycles All Alike?," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 123-180 National Bureau of Economic Research, Inc.
  18. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  19. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July.
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