The seminal work by Blanchard and Quah (1989) identifying long-run shocks finds that the unemployment rate increases following a “supply” shock. This puzzling result engenders a lively debate between leading schools of macroeconomic thought. But should we employ this model to study...

The seminal work by Blanchard and Quah (1989) identifying long-run shocks finds that the unemployment rate increases following a “supply” shock. This puzzling result engenders a lively debate between leading schools of macroeconomic thought. But should we employ this model to study...