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The dynamic effects of aggregate demand and supply disturbances

By OJ Blanchard and Danny Quah

Abstract

We interpret fluctuations in GNP and unemployment as due to two types of disturbances: disturbances that have a permanent effect on output and disturbances that do not. We interpret the first as supply disturbances, the second as demand disturbances. Demand disturbances have a hump-shaped mirror-image effect on output and unemployment. The effect of supply disturbances on output increases steadily over time, peaking after two years and reaching a plateau after five years

Topics: HB Economic Theory, HG Finance
Publisher: American Economic Association
Year: 1989
OAI identifier: oai:eprints.lse.ac.uk:1572
Provided by: LSE Research Online
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