Permanent and Transitory Shocks in Real Output: Estimates from Nineteenth-Century and Postwar Economies
- Resource Type
- research-article
- Authors
- Keating, John W.; Nye, John V.
- Source
- Journal of Money, Credit and Banking, 1998 May 01. 30(2), 231-251.
- Subject
- Supply shocks
Price shocks
Demand shocks
Aggregate supply shocks
Aggregate demand
Price levels
Statistical discrepancies
Macroeconomics
Vector autoregression
Economic models
- Language
- English
- ISSN
- 00222879
15384616
This paper reexamines Blanchard and Quah's (1989) aggregate supply/demand model interpretation of output shocks using data from ten countries. Although postwar data support their interpretation, the model is not supported by nineteenth-century data. In the postwar period, permanent output shocks cause the price level to move in the opposite direction (like supply shocks) and temporary output shocks cause the price level to move in the same direction (like demand shocks). But with pre-World War I data, permanent output shocks typically cause price level movements in the same direction. The results are systematic and cannot be explained by data problems.