Plucking models of business cycle fluctuations: Evidence from the G-7 countries
Year: 2002
Type: book-chapter
Abstract: Friedman’s ‘plucking’ model, in which output cannot exceed a ceiling level but is occasionally plucked downward by recessions, is tested using Kim and Nelson’s formal econometric specification on output data from the G-7 countries. Considerable support for the model is obtained, leading us to conclude that during normal periods, output seems to be driven mostly by permanent shocks, but during recessions and high-growth recoveries, transitory shocks dominate. During these periods macroeconomic models that emphasise demand-oriented shocks, rather than real business cycle type models, may thus be more appropriate.
Source: Physica-Verlag eBooks
Authors: Terence C. Mills, Ping Wang
Institution: Loughborough University
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2059462913