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Historical Decomposition of Aggregate Demand and Supply Shocks in a Small Macro Model

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  • James S. Fackler
  • W. Douglas McMillin

Abstract

We estimate and analyze the impact of multiple aggregate demand and aggregate supply shocks in a small macroeconomic model of the economy. The analysis serves two purposes. First, we assess the relative importance of the various shocks in explaining the path of output over the past three decades. Second, we conduct counterfactual policy experiments which show the effects of alternative policies on key macro variables. We find that using the monetary policy tool (reserves or the base) such that constant money growth occurs would have produced superior economic results.

Suggested Citation

  • James S. Fackler & W. Douglas McMillin, 1998. "Historical Decomposition of Aggregate Demand and Supply Shocks in a Small Macro Model," Southern Economic Journal, John Wiley & Sons, vol. 64(3), pages 648-664, January.
    • Handle: RePEc:wly:soecon:v:64:y:1998:i:3:p:648-664
    DOI: 10.1002/j.2325-8012.1998.tb00085.x
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    References listed on IDEAS

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    Cited by:

    1. Calvert Jump, Robert & Kohler, Karsten, 2022. "A history of aggregate demand and supply shocks for the United Kingdom, 1900 to 2016," Explorations in Economic History, Elsevier, vol. 85(C).
    2. James S. Fackler & W. Douglas McMillin, 2002. "Evaluating Monetary Policy Options," Southern Economic Journal, John Wiley & Sons, vol. 68(4), pages 794-810, April.
    3. Ms. Mercedes Garcia-Escribano & Mr. Fei Han, 2015. "Credit Expansion in Emerging Markets: Propeller of Growth?," IMF Working Papers 2015/212, International Monetary Fund.
    4. Chang, Jui-Chuan Della & Jansen, Dennis W. & Pagliacci, Carolina, 2023. "Inflation and real GDP growth in the U.S.—Demand or supply driven?," Economics Letters, Elsevier, vol. 231(C).
    5. Moses Kangogo & Mardi Dungey & Vladimir Volkov, 2023. "Changing vulnerability in Asia: contagion and spillovers," Empirical Economics, Springer, vol. 64(5), pages 2315-2355, May.
    6. W. Douglas McMillin, 2001. "The Effects of Monetary Policy Shocks: Comparing Contemporaneous versus Long‐Run Identifying Restrictions," Southern Economic Journal, John Wiley & Sons, vol. 67(3), pages 618-636, January.

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