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"Sources of Economic Fluctuations in the United States," The Quarterly Journal of Economics,1988.

Paper: pdf file

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 model.


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.