IDEAS home Printed from https://ideas.repec.org/a/eee/dyncon/v182y2026ics0165188925001976.html

Two main business cycle shocks are better than one

Author

Listed:
  • Granese, Antonio

Abstract

A recent influential study based on a Structural VAR with frequency-domain identification argues that most cyclical fluctuations in real activity are driven by a single shock. We revisit this view using a large-dimensional Dynamic Factor Model estimated on more than 100 U.S. macroeconomic series. Our data-rich approach uncovers two main shocks that jointly drive the business cycle: one transitory and demand-like, the other persistent and supply-like. This two-shock structure explains the bulk of both business-cycle and long-run fluctuations in key macroeconomic aggregates. The findings support a classical AD-AS interpretation and challenge the notion of a single dominant business-cycle shock.

Suggested Citation

  • Granese, Antonio, 2026. "Two main business cycle shocks are better than one," Journal of Economic Dynamics and Control, Elsevier, vol. 182(C).
    • Handle: RePEc:eee:dyncon:v:182:y:2026:i:c:s0165188925001976
    DOI: 10.1016/j.jedc.2025.105231
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165188925001976
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jedc.2025.105231?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:182:y:2026:i:c:s0165188925001976. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jedc .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.