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Observing Shocks

Author Info

Listed author(s):
  • Pedro Garcia Duarte
  • Kevin D. Hoover

Abstract

Macroeconomists have observed business cycle fluctuations over time by constructing and manipulating models in which shocks have increasingly played a greater role. Shock is a term of art that pervades modern economics appearing in nearly one-quarter of all journal articles in economics and in nearly half in macroeconomics. Surprisingly, its rise as an essential element in the vocabulary of economists can be dated only to the early 1970s. We trace the history of shocks in macroeconomics from Ragnar Frisch and Eugen Slutsky in the 1920s and 1930s through real business cycle and DSGE models and to the use of shocks as generators of impulse-response functions, which are in turn used as data in matching estimators. The history is organized around the observability of shocks. As well as documenting a critical conceptual development in economics, the history of shocks shows that James Bogen and James Woodward’s distinction between data and phenomena must be substantially relativized if it is to be at all plausible.

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Article provided by Duke University Press in its journal History of Political Economy.

Volume (Year): 44 (2012)
Issue (Month): 5 (Supplement)
Pages: 226-249

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Handle: RePEc:hop:hopeec:v:44:y:2012:i:5:p:226-249
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Keywords: observation; observing; shocks; macroeconomics; New Classical Macroeconomics; Ragnar Frisch; Trygve Haavelmo; Thomas Sargent; Robert Lucas; Finn Kydland; Edward Prescott; Christopher Sims;

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Cited by:

  1. Pedro Garcia Duarte, 2011. "Recent Developments in Macroeconomics: The DSGE Approach to Business Cycles in Perspective," Chapters,in: The Elgar Companion to Recent Economic Methodology, chapter 16 Edward Elgar Publishing.
  2. Kevin Hoover & Katarina Juselius, 2012. "Experiments, Passive Observation and Scenario Analysis: Trygve Haavelmo and the Cointegrated Vector Autoregression," Discussion Papers 12-16, University of Copenhagen. Department of Economics.
  3. Pedro Garcia Duarte, 2012. "Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics," Chapters,in: Microfoundations Reconsidered, chapter 6 Edward Elgar Publishing.

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