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What moves GNP?


  • Harald Uhlig


This paper aims at identifying the main shocks, which cause movements in real GNP. It does so by searching for two shocks in the context of a VAR model, which explain the majority of the k-step ahead prediction error variances in real GNP for horizons between 0 and 5 years. We find that two shocks can typically explain more than 90\% of the variance at all horizons for real GNP. While one shock looks like a productivity shock in the line of the real business cycle literature, the other one seems to be wage-push or inflationary shock, unrelated to consumption or government spending and not induced by monetary policy. While the first shock can be viewed as a ''supply shock'', the second shock does not have an obvious ''demand shock'' interpretation.

Suggested Citation

  • Harald Uhlig, 2004. "What moves GNP?," Econometric Society 2004 North American Winter Meetings 636, Econometric Society.
  • Handle: RePEc:ecm:nawm04:636

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    References listed on IDEAS

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    Cited by:

    1. Grydaki, Maria & Bezemer, Dirk, 2013. "The role of credit in the Great Moderation: A multivariate GARCH approach," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4615-4626.
    2. Marta Banbura & Domenico Giannone & Lucrezia Reichlin, 2010. "Large Bayesian vector auto regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(1), pages 71-92.
    3. Marta Banbura & Domenico Giannone & Lucrezia Reichlin, 2010. "Large Bayesian vector auto regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(1), pages 71-92.
    4. Mertens, Elmar, 2010. "Structural shocks and the comovements between output and interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 34(6), pages 1171-1186, June.
    5. Chen, Kaiji & Wemy, Edouard, 2015. "Investment-specific technological changes: The source of long-run TFP fluctuations," European Economic Review, Elsevier, vol. 80(C), pages 230-252.

    More about this item


    VAR; factor models; impulse responses; identification; macroeconomic shocks;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles


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