Output Adjustment in Developing Countries: a Structural Var Approach

Morling, Steven (2002) Output Adjustment in Developing Countries: a Structural Var Approach. Discussion Paper No 307, School of Economics, The University of Queensland.

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Author Morling, Steven
Title Output Adjustment in Developing Countries: a Structural Var Approach
School, Department or Centre School of Economics
Institution The University of Queensland
Report Number Discussion Paper No 307
Publication date 2002-05-01
Subject 340213 Economic Development and Growth
Abstract/Summary This paper examines whether temporary fluctuations in output around potential in developing countries are induced primarily by aggregate demand shocks or temporary aggregate supply shocks. Structural vector autoregression methodology using long-run restrictions is used to identify temporary output shocks for a large sample of developing countries. Impulse response functions are used to examine whether the temporary shocks behave like demand or supply shocks. The permanent/transitory decomposition appears to split the shocks into permanent supply shocks, and temporary demand or supply shocks depending on which influence dominates in a particular country. In a little over half of the countries, temporary shocks behave like temporary aggregate supply shocks; in a little under half of the countries the temporary shocks behave like aggregate demand shocks.
Keyword Structural vector autoregression methodology
Developing countries
Economic development
Aggregate demand shocks
Aggregate supply shocks
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