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

In: NBER International Seminar on Macroeconomics 2004

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  • Neville Francis
  • Valerie A. Ramey

Abstract

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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Suggested Citation

  • Neville Francis & Valerie A. Ramey, 2006. "The Source of Historical Economic Fluctuations: An Analysis Using Long-Run Restrictions," NBER Chapters,in: NBER International Seminar on Macroeconomics 2004, pages 17-73 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:0084
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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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