Working Papers

2013-32 | July 2017


Shocks and Adjustments

Author(s): Mary C. Daly, John G. Fernald, Oscar Jorda, and and Fernanda Nechio

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.

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Article Citation

Daly, Mary C, John G. Fernald, Oscar Jorda, and and Fernanda Nechio. 2017. "Shocks and Adjustments," Federal Reserve Bank of San Francisco Working Paper 2013-32. Available at