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Permanent and Transitory Components in Macroeconomic Fluctuations

John Campbell () and N. Gregory Mankiw ()

No 2169, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Fluctuations in real GNP have traditionally been viewed as transitory deviations from a deterministic time trend. The purpose of this paper is to review some of the recent developments that have led to a new view of output fluctuations and then to provide some additional evidence. Using post-war quarterly data, it is hard to reject the view that real GNP is as persistent as a random walk with drift. We also consider the hypothesis that the recent finding of persistence are due to the failure to distinguish the business cycle from other fluctuations in real GNP. We use the measured unemployment rate to decompose output fluctuations. We find no evidence for the view that business cycle fluctuations are more quickly trend-reverting.

Date: 1987-02
Note: EFG
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Published as Campbell, John and N. Gregory Mankiw. "American Economic Review, Vol. 77, No. 2, May 1987, pp. 111-117.

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Journal Article: Permanent and Transitory Components in Macroeconomic Fluctuations (1987) Downloads
Working Paper: Permanent and Transitory Components in Macroeconomic Fluctuations (1987) Downloads
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