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An application of estimating structural vector autoregression models with long-run restrictions

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  • Gamber, Edward N.
  • Joutz, Frederick L.

Abstract

This paper estimates the contribution of aggregate demand and supply shocks to economic fluctuations. Following Blanchard and Quah we estimate a vector autoregression with long-run restrictions to identify structural demand and supply shocks. We investigate the effects of temporal aggregation on the contribution of these shocks to business cycle fluctuations. Using the industrial production index which is a more cyclically volatile measure of output than GNP, we find results qualitatively similar to theirs. Quantitatively, however, our results differ in that we find a larger fraction of output variation is explained by supply shocks and a larger fraction of unemployment variation is explained by demand shocks.

Suggested Citation

  • Gamber, Edward N. & Joutz, Frederick L., 1993. "An application of estimating structural vector autoregression models with long-run restrictions," Journal of Macroeconomics, Elsevier, vol. 15(4), pages 723-745.
    • Handle: RePEc:eee:jmacro:v:15:y:1993:i:4:p:723-745
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    Citations

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    Cited by:

    1. Keating, John W. & Nye, John V., 1999. "The Dynamic Effects of Aggregate Demand and Supply Disturbances in the G7 Countries," Journal of Macroeconomics, Elsevier, vol. 21(2), pages 263-278, April.
    2. Acharya, Ram N. & Gentle, Paul F. & Mishra, Ashok K. & Paudel, Krishna P., 2008. "Examining The Crb Index As An Indicator For U.S. Inflation," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6760, Southern Agricultural Economics Association.
    3. Marcellino, Massimiliano, 1999. "Some Consequences of Temporal Aggregation in Empirical Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 129-136, January.
    4. James S. Fackler & W. Douglas McMillin, 1998. "Historical Decomposition of Aggregate Demand and Supply Shocks in a Small Macro Model," Southern Economic Journal, John Wiley & Sons, vol. 64(3), pages 648-664, January.
    5. Keating, John W., 2013. "What do we learn from Blanchard and Quah decompositions of output if aggregate demand may not be long-run neutral?," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 203-217.
    6. Alejandro Diaz-Bautista, 2004. "Tijuana's Dynamic Unemployment and Output Growth," Labor and Demography 0401001, University Library of Munich, Germany.
    7. Giuseppe Travaglini & Alessandro Bellocchi, 2018. "How supply and demand shocks affect productivity and unemployment growth: evidence from OECD countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(3), pages 955-979, December.
    8. Bukowski, Maciej & Koloch, Grzegorz & Lewandowski, Piotr, 2008. "Shocks and rigidities as determinants of CEE labor markets' performance. A panel SVECM approach," MPRA Paper 12429, University Library of Munich, Germany.
    9. John W. Keating, 2013. "What Do We Learn from Blanchard and Quah Decompositions If Aggregate Demand May Not be Long-Run Neutral?," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201302, University of Kansas, Department of Economics.
    10. Maciej Bukowski & Grzegorz Koloch & Piotr Lewandowski, 2013. "Shocks and rigidities as determinants of CEE labour markets’ performance," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(3), pages 553-581, July.

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