Are Business Cycles All Alike?

56 Pages Posted: 4 Apr 2004

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Mark W. Watson

Princeton University - Woodrow Wilson School of Public and International Affairs; National Bureau of Economic Research (NBER)

Date Written: June 1984

Abstract

This paper examines two questions. The first is whether economic fluctuations-business cycles-are due to an accumulation of nall shocks or instead mostly to infrequent large shocks. The paper concludes that neither of these two extreme views accurately characterize fluctuations. The second question is whether fluctuations are due mostly to one source of shocks, for example monetary, or instead to many sources. The paper concludes that evidence strongly supports the hypothesis of many, about equally important, sources of shocks.To analyze the empirical evidence and to reach these conclusions, the paper uses two different statistical approaches. The first is estimation ofa structural model, using a set of just identifying restrictions. The secondis non-structural and may be described as a formalization of the Burns Mitchell techniques. Both approaches are somewhat novel and should be of independent interest.

Suggested Citation

Blanchard, Olivier J. and Watson, Mark W., Are Business Cycles All Alike? (June 1984). NBER Working Paper No. w1392. Available at SSRN: https://ssrn.com/abstract=324030

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Mark W. Watson

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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