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"Sources of Economic Fluctuations in the United
Quarterly Journal of Economics, May 1988, 313-332.
pdf file (963KB).
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 economics seem
complicated. The purpose of this paper is to provide quantitative estimates
of various sources of variability using a 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 surpressed in the
This paper is an application of stochastic simulation to analyze an important
question in macroeconomics, namely the ultimate sources of macroeconomic
fluctuations. The US model is used for the results. The material in
Chapter 10, Section 10.3, and Chapter 11, Section 11.4, in
1994#2 is based on this paper.