Stochastic Trends and Economic Fluctuations

Robert King (), Charles Plosser (), James Stock and Mark Watson

American Economic Review, 1991, vol. 81, issue 4, 819-40

Abstract: Are business cycles mainly the result of permanent shocks to productivity? This paper uses a long-run restriction implied by a large class of real-business-cycle models--identifying permanent productivity shocks as shocks to the common stochastic trend in output, consumption, and investment--to provide new evidence on this question. Econometric tests indicate that this common-stochastic-trend/cointegration implication is consistent with postwar U.S. data. However, in systems with nominal variables, the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business-cycle variability in output, consumption, and investment. Copyright 1991 by American Economic Association.

Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (844)

Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819910 ... O%3B2-2&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: Stochastic trends and economic fluctuations (1991)
Working Paper: Stochastic Trends and Economic Fluctuations (1987)
Software Item: RATS programs to replicate King, Plosser, Stock, Watson AER 1991 results
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:81:y:1991:i:4:p:819-40

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().