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

  • 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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File URL: http://www.nber.org/papers/w10631.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10631.

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Date of creation: Jul 2004
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Publication status: published as The Source of Historical Economic Fluctuations: An Analysis Using Long-Run Restrictions , Neville Francis, Valerie A. Ramey. in NBER International Seminar on Macroeconomics 2004 , Clarida, Frankel, Giavazzi, and West. 2006
Handle: RePEc:nbr:nberwo:10631
Note: EFG ME
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  15. King, Robert G. & Wolman, Alexander L., 2013. "Inflation Targeting in a St. Louis Model of the 21st Century," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 543-574.
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  17. Casey B. Mulligan, 2002. "A Century of Labor-Leisure Distortions," NBER Working Papers 8774, National Bureau of Economic Research, Inc.
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