2013-32 | July 1, 2017

The manner firms respond to shocks reflects fundamental features of labor, capital, and commodity markets, as well as advances in finance and technology. Such features are integral to constructing models of the macroeconomy. In this paper we document secular shifts in the margins firms use, in aggregate, to adjust to shocks that have consequences for the economy’s cyclical behavior. These new business cycle facts on the comovement of output and its inputs are a natural complement to analyzing output and its expenditure components. Our findings shed light on the changing cyclicality of productivity in response to different shocks.

Article Citation

Nechio, Fernanda, John G. Fernald, Mary C. Daly, and Oscar Jorda. 2013. “Shocks and Adjustments,” Federal Reserve Bank of San Francisco Working Paper 2013-32. Available at https://doi.org/10.24148/wp2013-32

About the Authors
Mary C. Daly
Mary C. Daly is president and CEO of the Federal Reserve Bank of San Francisco. Learn more about Mary C. Daly
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John G. Fernald is a senior research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco, and a professor of economics at INSEAD. Learn more about John G. Fernald
Òscar Jordà
Òscar Jordà is a senior policy advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Òscar Jordà
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Fernanda Nechio is a vice president in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Fernanda Nechio