Are we ignoring supply shocks? A proposal for monitoring cyclical fluctuations

Pagliacci, Carolina

doi:10.1007/s00181-017-1371-x

Cited by 10 publications

(6 citation statements)

References 20 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…War I, and for short periods post-World War II for the USA. Pagliacci (2019) similarly employs sign restrictions.…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Identifying supply and demand shocks in the South African Economy, 1960–2020

Fedderke

2022

South African J Economics

View full text Add to dashboard Cite

This paper addresses the identification of supply and demand shocks in the South African economy over the 1960–2020 period, the relative importance of the two types of shock to fluctuations of growth and inflation from their steady‐state values, as well as the potential impact of the two types of shocks on the steady‐state growth and inflation values. Crucially, the paper examines the significance of three alternative identification strategies on the nature of supply and demand shocks and their impact on the economy: zero shock covariance in the presence of long‐run demand neutrality; non‐zero shock covariance in the presence of long‐run demand neutrality and long‐run demand non‐neutrality with zero shock covariance. Interest lies in which of the identification strategies provides shock decompositions that are theoretically coherent and congruent with the empirics of South African growth and inflation. Results support non‐zero shock covariance in the presence of long‐run demand neutrality identification. The analysis suggests that growth shocks in South Africa are dominated by supply shocks, and inflation shocks by demand shocks. Further, negative supply shocks lower steady state growth and raise steady‐state inflation, while positive demand shocks only raise steady‐state inflation and are growth neutral. South Africa appears relatively isolated from international productivity shocks.

show abstract

“…War I, and for short periods post-World War II for the USA. Pagliacci (2019) similarly employs sign restrictions.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Both papers confirm the general finding in the BQ‐type literature that output volatility is primarily due to supply shocks in the long run, though they note long‐run output effects from demand shocks prior to World War I, and for short periods post‐World War II for the USA. Pagliacci (2019) similarly employs sign restrictions.…”

Section: Literature Reviewmentioning

confidence: 99%

Identifying supply and demand shocks in the South African Economy, 1960–2020

Fedderke

2022

South African J Economics

View full text Add to dashboard Cite

show abstract

“…Another advancement in evaluating the results of SVAR models is the use of historical variance decompositions. Pagliacci (2016) estimates a sign-restricted SVAR model using data from the USA and some Latin American countries and calculates the historical decomposition of output growth in response to supply and demand shocks. Thus, depending on the dynamic effects of structural shocks on prices and output, two new indicators are presented to those who make monetary policy decisions.…”

Section: A Short Literature Reviewmentioning

confidence: 99%

The Origins and Dynamics of Inflation in Turkey: An SVAR Approach

Şiklar

2022

AJEER

View full text Add to dashboard Cite

This study aims to present empirical evidence on the relative importance of supply and demand-side factors in determining the fluctuations in the general level of prices in the Turkish economy. The employed strategy uses the view that supply and demand pressures can be distinguished from each other depending on the direction of their effects on price and quantity. After classifying the related economic variables as supply, demand, and common factors, the main determinants of domestic supply and demand were estimated econometrically using sample data from 2003:1–2021:4, and their relative contribution to inflation was calculated. By using these basic determinants, the estimated structural vector autoregressive (SVAR) model shows that the pressures arising from the supply side are more dominant than the pressures of the demand side on the inflationary process in Turkey. The results indicate that the methodology suggested in this study will be useful in separating the factors that contribute to inflation, which has recently gotten out of control in Turkey and is gradually moving away from the targeted inflation. Policymakers considering these findings can reach optimal decisions in conducting the monetary policy toward the targeted level of inflation.

show abstract

“…The macroeconomic data used to compute the macroeconomic stability index for Venezuela comprise a total of 19 variables that include information from several economic sectors: goods market (output growth, inflation and unemployment), monetary (two variables that measure the monetary effects of fiscal and exchange rate actions), external (growth rates of exchange rate, international reserves, oil exports, imports, the current account balance and a capital inflow This data also includes a measure of excess demand in the goods market, denominated the goods market unbalance (GMU), as defined in Pagliacci (2016). Opposed to output gaps measures, which intend to capture the mere occurrence of demand shocks, the goods market unbalance is a measurement of excess demand in a framework where both supply and demand shocks can have short-run impacts on output.…”

Section: Estimation Of the Macroeconomic Stability Indexmentioning

confidence: 99%

Understanding Financial Fluctuations and Their Relation to Macroeconomic Stability

Guarata¹,

Pagliacci²

2017

Self Cite

View full text Add to dashboard Cite

work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2017 1 Abstract * This paper examines how financial fluctuations and macroeconomic stability interact in the case of Venezuela, acknowledging that financial conditions deteriorating the macroeconomic environment can arise with both good and bad macroeconomic performance. An empirical methodology is provided that constructs two indexes, which are fully interpretable and are constructed with a minimum set of assumptions applied to a large number of financial time series. Structural interpretation of indexes is pursued using a structural VAR (SVAR) that associates macroeconomic stability with financial indexes. For Venezuela, a deterioration of procyclical financial conditions relates to financial margin reductions and expansions in banks' balance sheets, which are mostly triggered by unexpected increases in net primary money creation. Such expansions tend to appear in situations of declining macroeconomic stability. Worse countercyclical financial conditions are instead associated with situations of rising bank profitability, deleveraging and increased banking instability. In this case, fragility tends to materialize in periods of ameliorated macroeconomic stability. JEL classifications: E30, G10, E00

show abstract

Are we ignoring supply shocks? A proposal for monitoring cyclical fluctuations

Cited by 10 publications

References 20 publications

Identifying supply and demand shocks in the South African Economy, 1960–2020

Identifying supply and demand shocks in the South African Economy, 1960–2020

The Origins and Dynamics of Inflation in Turkey: An SVAR Approach

Understanding Financial Fluctuations and Their Relation to Macroeconomic Stability

Contact Info

Product

Resources

About