Using the Aggregate Demand-Aggregate Supply Model to Identify Structural Demand-Side and Supply-Side Shocks: Results Using a Bivariate VAR

Cover, James Peery; Enders, Walter; Hueng, C. James

doi:10.2139/ssrn.323462

Using the Aggregate Demand-Aggregate Supply Model to Identify Structural Demand-Side and Supply-Side Shocks: Results Using a Bivariate VAR

U of Alabama, Economics, Finances and Legal Studies Working Paper No. 020801

33 Pages Posted: 30 Mar 2003

See all articles by James Peery Cover

James Peery Cover

University of Alabama - Department of Economics, Finance and Legal Studies

Walter Enders

University of Alabama - Department of Economics, Finance and Legal Studies

C. James Hueng

Western Michigan University - Department of Economics

Date Written: August 13, 2002

Abstract

This paper uses the short-run restrictions implied by the aggregate demand-aggregate supply model as an aid in identifying structural shocks to aggregate demand and aggregate supply. Combined with the Blanchard-Quah restriction this allows estimates of the slope of the aggregate supply curve, the variances of the structural demand and supply shocks, and the extent to which structural demand and supply shocks are correlated.

Keywords: VAR, supply shock, demand shock, bivariate VAR, aggregate supply, aggregate demand, slope of aggregate supply

JEL Classification: E0, E3

Suggested Citation: Suggested Citation

Cover, James Peery and Enders, Walter and Hueng, C. James, Using the Aggregate Demand-Aggregate Supply Model to Identify Structural Demand-Side and Supply-Side Shocks: Results Using a Bivariate VAR (August 13, 2002). U of Alabama, Economics, Finances and Legal Studies Working Paper No. 020801, Available at SSRN: https://ssrn.com/abstract=323462 or http://dx.doi.org/10.2139/ssrn.323462