The Structural Dynamics of U.S. Output and Inflation: What Explains the Changes?

63 Pages Posted: 28 Dec 2006

See all articles by Fabio Canova

Fabio Canova

BI Norwegian Business School

Luca Gambetti

Universitat Pompeu Fabra - Department of Economics and Business (DEB)

Evi Pappa

London School of Economics & Political Science (LSE); Autonomous University of Barcelona - Department of Economics and Economic History

Date Written: October 2006

Abstract

We examine the dynamics of U.S. output and inflation using a structural time varying coefficient VAR. We show that there are changes in the volatility of both variables and in the persistence of inflation. Technology shocks explain changes in output volatility, while a combination of technology, demand and monetary shocks explain variations in the persistence and volatility of inflation. We detect changes over time in the transmission of technology shocks and in the variance of technology and of monetary policy shocks. Hours and labour productivity always increase in response to technology shocks.

Keywords: Variability, persistence, transmission, structural time varying VARs

JEL Classification: C11, E12, E32, E62

Suggested Citation

Canova, Fabio and Gambetti, Luca and Pappa, Paraskevi (Evi), The Structural Dynamics of U.S. Output and Inflation: What Explains the Changes? (October 2006). CEPR Discussion Paper No. 5879, Available at SSRN: https://ssrn.com/abstract=953910

Fabio Canova (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Luca Gambetti

Universitat Pompeu Fabra - Department of Economics and Business (DEB) ( email )

Barcelona, 08005
Spain

Paraskevi (Evi) Pappa

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7584 (Phone)
+44 20 7831 1840 (Fax)

Autonomous University of Barcelona - Department of Economics and Economic History ( email )

Edifici B - Campus Bellaterra
Barcelona, 08193
Spain

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