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
Date Written: August 13, 2002
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