Inflation and Real GDP Growth in the U.S.
Abstract
Here, authors Dennis Jansen, Jui-Chuan Della Chang, and Carolina Pagliacci look at the recent experience of the United States via the lens of sign restrictions to identify shocks to aggregate demand and aggregate supply. The authors use historical decompositions to create the components of real GDP growth, and inflation, that are due to the cumulation of the shocks to aggregate demand or aggregate supply. Findings show strong evidence that the experience of the U.S. during the Covid Recession and during the subsequent recovery as driven by both aggregate demand and aggregate supply. In particular, both aggregate demand and aggregate supply shocks are responsible for the large increase in the U.S. inflation rate. Real GDP growth was largely driven by aggregate demand shocks, with aggregate supply shocks exerting a drag on output growth.
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Citation
Jansen, Dennis W.; Chang, Jui-Chuan Della; Pagliacci, Carolina (2023). Inflation and Real GDP Growth in the U.S.. Private Enterprise Research Center, Texas A&M University; Texas A&M University. Library. Available electronically from https : / /hdl .handle .net /1969 .1 /199392.