Sources of Output and Price Variability in a Macroeconometric Model
There has been much recent discussion about the ultimate sources of macroeconomic variability. A number of authors attribute most of this variability to only a few sources, sometimes only one. Although there may be only a few important sources, this is far from obvious, since economies seem complicated. The purpose of this paper is to provide quantitative estimates of various sources of variability using my U.S. econometric model. Stochastic simulation is used to estimate how much the overall variances of real GNP and the GNP deflator are reduced when various shocks are suppressed in the model. The results show two main things. The first is that the contribution of a given shock to the variance can vary considerably as the length ahead of the prediction varies. What is important for the one-quarter-ahead prediction may not be important for the eight-quarter-ahead prediction, and vice versa. The second is that the results imply that there are many important sources of variability for real GNP. It is not the case that one or two sources dominate. This is less true for the GNP deflator, however, where there are two very important sources, shocks to the price and wage equations and shocks to the price of imports, and one moderately important one, shocks to the government exogenous variables.
|Date of creation:||Dec 1986|
|Publication status:||published as "Sources of Economic Fluctuations in the United States." From The Quarterly Journal of Economics, Vol. CIII, No. 2, pp. 313-332, (May 1988).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert J. Shiller, 1987. "Ultimate Sources of Aggregate Variability," Cowles Foundation Discussion Papers 816, Cowles Foundation for Research in Economics, Yale University.
- Barro, Robert J, 1977.
"Unanticipated Money Growth and Unemployment in the United States,"
American Economic Review,
American Economic Association, vol. 67(2), pages 101-115, March.
- Robert J. Barro, 1976. "Unanticipated Money Growth and Unemployment in the United States," Working Papers 234, Queen's University, Department of Economics.
- Kydland, Finn E & Prescott, Edward C, 1982.
"Time to Build and Aggregate Fluctuations,"
Econometric Society, vol. 50(6), pages 1345-1370, November.
- Finn E. Kydland & Edward C. Prescott, 1982. "Executable program for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4, Quantitative Macroeconomics & Real Business Cycles.
- Finn E. Kydland & Edward C. Prescott, 1982. "Web interface for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4a, Quantitative Macroeconomics & Real Business Cycles.
- Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.
- Robert E. Hall, 1986. "The Role of Consumption in Economic Fluctuations," NBER Chapters,in: The American Business Cycle: Continuity and Change, pages 237-266 National Bureau of Economic Research, Inc.
- Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 777-793, August.
- Ray C. Fair, 1984. "The Use of Expected Future Variables in Macroeconometric Models," NBER Working Papers 1445, National Bureau of Economic Research, Inc.
- Ray C. Fair, 1984. "The Use of Expected Future Variables in Macroeconometric Models," Cowles Foundation Discussion Papers 718, Cowles Foundation for Research in Economics, Yale University.
- Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2112. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.