Autore
Waldmann, Robert

Titolo
Assessing the relative sizes of industry and nation specific shocks to output
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1991 - Fascicolo: 41 - Pagina iniziale: 1 - Pagina finale: 12

This paper discusses efforts to determine the relative strengths of supply and demand shocks to output. Alan Stockman has used an international panel of value added by industry to try to identify demand and supply shocks to output. He uses the identifying assumption that demand has a nation specific component while supply shocks are international and industry specific. Therefore shifts in a industry's output which are correlated with shifts in the output of different industries in the same country but are not correlated with shifts in output of the same industry in different countries are ascribed to demand shocks. Similarly shifts in output which are correlated within industries across countries but not across industries within countries are ascribed to supply shocks. Stockman concludes that both demand and supply shocks are required to explain fluctuations in output. He estimates that identified nation effects and identified industry effects have a similar variance. Most of the variance is unidentified. In different calculations Stockman assumes either that all industries are equally cyclical or that demand fluctuations explain an equal fraction of the variance of output of each industry. These assumptions are both false and lead him to underestimate the importance of demand relative to supply shocks. I follow Stockman but avoid the assumptions that bias his estimates of the variance of demand driven fluctuations. I conclude that identified demand shocks explain a substantially greater fraction of the variance of output than identified supply shocks.



Testo completo: http://hdl.handle.net/1814/380

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