Working Paper: NBER ID: w2313
Authors: Alan C. Stockman
Abstract: A class of real business cycle models suggests that shocks to technology can explain aggregate fluctuations in output and employment. This paper begins from the premise that shocks to productivity may vary across industries but are unlikely to vary systematically across national boundaries for a set of developed countries. Alternative sources of macroeconomic fluctuations, however, such as those due to nation-specific government policies, may produce variations in output growth across nations that are common to industries. This paper discusses these implications within the context of a simple theoretical model, then the paper decomposes the quarterly and annual growth rate of industrial production in two-digit manufacturing industries in seven European countries and the United States into components that are specific to industries but common to nations, and idiosyncratic components. The paper shows that shocks that are nation-specific and common to industries are important, and cast doubt on the hypothesis that most macroeconomic fluctuations can be ascribed to shocks to technology.
Keywords: Industrial Output; Business Cycles; Real Business Cycle Models; Macroeconomic Fluctuations
JEL Codes: E32; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| industry-specific disturbances (L79) | output fluctuations (E39) |
| nation-specific disturbances (F52) | output fluctuations (E39) |
| national policies (H59) | nation-specific disturbances (F52) |
| industry-specific disturbances (L79) | national aggregate industrial production growth rates (E23) |
| nation-specific disturbances (F52) | national aggregate industrial production growth rates (E23) |