The paper "Are Output Fluctuations Transitory?" by John Y. Campbell and N. Gregory Mankiw challenges the conventional view that output fluctuations are temporary deviations from a trend. They examine quarterly postwar United States data and find that an unexpected change in real GNP of 1% should change one's forecast by over 1% over a long horizon, suggesting that shocks to GNP are largely permanent. The authors estimate various ARIMA models and use nonparametric methods to confirm the persistence of shocks. They conclude that output fluctuations are highly persistent, which contradicts the idea that shocks to aggregate demand have only temporary effects. The findings have implications for economic theories, particularly those that assume the natural rate hypothesis or focus on aggregate demand shocks. The paper also discusses the robustness of their results and the limitations of the maximum likelihood estimation method.The paper "Are Output Fluctuations Transitory?" by John Y. Campbell and N. Gregory Mankiw challenges the conventional view that output fluctuations are temporary deviations from a trend. They examine quarterly postwar United States data and find that an unexpected change in real GNP of 1% should change one's forecast by over 1% over a long horizon, suggesting that shocks to GNP are largely permanent. The authors estimate various ARIMA models and use nonparametric methods to confirm the persistence of shocks. They conclude that output fluctuations are highly persistent, which contradicts the idea that shocks to aggregate demand have only temporary effects. The findings have implications for economic theories, particularly those that assume the natural rate hypothesis or focus on aggregate demand shocks. The paper also discusses the robustness of their results and the limitations of the maximum likelihood estimation method.