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Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S

Matthias Gubler () and Matthias Hertweck ()

No 2011-03, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: This paper develops a 9-dimensional SVAR to investigate the sources of the U.S. business cycle. We extend the standard set of identified shocks to include unexpected changes in commodity prices. Our main result is that commodity price shocks are a very important driving force of macroeconomic fluctuations, second only to investment-specific technology shocks. In particular, we find that commodity price shocks explain a large share of cyclical movements in inflation. Neutral technology shocks and monetary policy shocks seem less relevant at business cycle frequencies. The impulse response dynamics provide support for medium-scale DSGE models, but not for strong price rigidities.

Keywords: business cycles; commodity price shocks; structural VAR (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 Q43 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2011-03-25
New Economics Papers: this item is included in nep-bec, nep-cba, nep-mac and nep-opm
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Related works:
Journal Article: Commodity price shocks and the business cycle: Structural evidence for the U.S (2013) Downloads
Working Paper: Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S (2013) Downloads
Working Paper: Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S (2011) Downloads
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