A1758
Title: An American macroeconomic picture: Supply and demand shocks in the frequency domain
Authors: Mario Forni - University of Modena and Reggio Emilia (Italy)
Luca Gambetti - UAB (Spain)
Antonio Granese - University of Modena and Reggio Emilia (Italy)
Stefano Soccorsi - Department of Economics, Lancaster University Management School (United Kingdom) [presenting]
Sala Luca - Bocconi University - Milan (Italy)
Abstract: A few new empirical facts are provided that theoretical models should feature in order to be consistent with the data. Firstly, there are two classes of shocks: demand and supply. Supply shocks have long-run effects on economic activity, but demand shocks do not. Secondly, both supply and demand shocks are important sources of business cycle fluctuations. Thirdly, supply shocks are the primary driver for consumption fluctuations, and demand shocks for investment. Lastly, the demand shock is closely related to the credit spread, while the supply shock is essentially a news shock. The results are obtained using a novel frequency domain method.
