Use this identifier to quote or link this document: http://hdl.handle.net/2072/152025

Macroeconomic shocks and the business cycle: evidence from a structural factor model
Forni, Mario; Gambetti, Luca
Universitat Autònoma de Barcelona. Unitat de Fonaments de l'Anàlisi Econòmica; Institut d'Anàlisi Econòmica
We use a dynamic factor model to provide a semi-structural representation for 101 quarterly US macroeconomic series. We find that (i) the US economy is well described by a number of structural shocks between two and six. Focusing on the four-shock specification, we identify, using sign restrictions, two non-policy shocks, demand and supply, and two policy shocks, monetary and fiscal. We obtain the following results. (ii) Both supply and demand shocks are important sources of fluctuations; supply prevails for GDP, while demand prevails for employment and inflation. (ii) Policy matters, Both monetary and fiscal policy shocks have sizeable effects on output and prices, with little evidence of crowding out; both monetary and fiscal authorities implement important systematic countercyclical policies reacting to demand shocks. (iii) Negative demand shocks have a large long-run positive effect on productivity, consistently with the Schumpeterian "cleansing" view of recessions.
2011-06-09
Oferta i demanda -- Models matemàtics
Política fiscal -- Models matemàtics
Política monetària -- Models matemàtics
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Working Paper
Working papers; 850.10
         

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