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Sectoral and national aggregate disturbances to industrial output in seven European countries

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  • Stockman, Alan C.

Abstract

A class of real business cycle models suggests that shocks to technology can explain aggregate fluctuations in output and employment. This paper begins from the premise that shocks to productivity may vary across industries but are unlikely to vary systematically across national boundaries for a set of developed countries. Alternative sources of macroeconomic fluctuations, however, such as those due to nation-specific government policies, may produce variations in output growth across nations that are common to industries. This paper discusses these implications within the context of a simple theoretical model, then the paper decomposes the quarterly and annual growth rate of industrial production in two-digit manufacturing industries in seven European countries and the United States into components that are specific to industries but common to nations, and idiosyncratic components. The paper shows that shocks that are nation-specific and common to industries are important, and cast doubt on the hypothesis that most macroeconomic fluctuations can be ascribed to shocks to technology.
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  • Stockman, Alan C., 1988. "Sectoral and national aggregate disturbances to industrial output in seven European countries," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 387-409.
  • Handle: RePEc:eee:moneco:v:21:y:1988:i:2-3:p:387-409
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    1. 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.
    2. Bennett T. McCallum, 1988. "Real Business Cycle Models," NBER Working Papers 2480, National Bureau of Economic Research, Inc.
    3. Altonji, Joseph G & Ham, John C, 1990. "Variation in Employment Growth in Canada: The Role of External, National, Regional, and Industrial Factors," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 198-236, January.
    4. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    5. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
    6. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-594, June.
    7. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
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