We show that under indeterminacy aggregate demand shocks are able to explain not only aspects of actual fluctuations that standard RBC models predict fairly well, but also aspects of actual fluctuations that standard RBCmodels cannot explain, such as the hump-shaped, trend reverting impulse responses to transitory shocks found in US output (Cogley and Nason, AER, 1995); the large forecastable m...

This Online Appendix addresses several issues mentioned but not discussed in depth in the paper. Section I discusses various extensions of the basic model. Section II shows that for our identification arguments, it is sufficient to observe aggregate demand where it is singlevalued. Section III provides a proof of part 3 of Proposition 4. Section IV provides an example that shows that the set of...

Microeconomic theory develops demand and supply curves to determine the market equilibrium for commodity exchange. The demand and supply functions are the result of consumers utilities and producers production functions for different product combinations. The interaction is a game-theoretic approach to determine the quantity and prices with which goods and services are traded. Economic theory w...

This study estimates the aggregate import demand function for Nigeria for the period of 1980 2010. Cointegration approach was implemented. While the error correction term in the estimated VEC model was evaluated for long run causal relationship, the short term coefficients were gauged for short term causal relationship between the explained and the explanatory variables. Results indicate: (i) t...

We decompose the behavior of GNP and unemployment into the dynamic effects of two types of shocks: shocks that have a permanent effect on output and shocks that do not. We interpret the £rst as supply shocks, the second as demand shocks. We £nd that demand disturbances have a bump shaped effect on both output and unemployment; the effect peaks after a year and vanishes after two to three years....