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The Source of Historical Economic Fluctuations: An Analysis Using Long-Run Restrictions

In: NBER International Seminar on Macroeconomics 2004

  • Neville Francis
  • Valerie A. Ramey

This paper investigates the source of historical fluctuations in annual US data extending back to the late 19th century. Long-run identifying restrictions are used to decompose productivity, hours, and output into technology shocks and non-technology shocks. A variety of models with differing auxiliary assumptions are investigated. The preferred model suggests that the Great Depression was a period in which both types of shocks were very negative. On the other hand, our estimates support the microeconomic evidence of historically large positive technology shocks from 1934 to 1936. Finally, both types of shocks are responsible for the reduction in the variance of output in the post-WWII period.

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This chapter was published in:
  • Richard H. Clarida & Jeffrey Frankel & Francesco Giavazzi & Kenneth D. West, 2006. "NBER International Seminar on Macroeconomics 2004," NBER Books, National Bureau of Economic Research, Inc, number clar06-1, October.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 0084.
    Handle: RePEc:nbr:nberch:0084
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    10. Charles L. Evans, 1991. "Productivity shocks and real business cycles," Working Paper Series, Macroeconomic Issues 91-22, Federal Reserve Bank of Chicago.
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