The Dynamic Effects of Aggregate Demand and Supply Disturbances

Abstract: We interpret flucturations 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-output increases steadily over time, peaking after two years and reaching a plateau after five years.

Authors: Olivier Jean Blanchard and Danny Quah

20 Blanchard & Quah 1989.pdf