Valerie A. Ramey's NBER working paper explores the identification of macroeconomic shocks and their propagation mechanisms. The paper reviews recent innovations in identifying shocks, including monetary, fiscal, and technology shocks, and discusses their implications for economic fluctuations. It highlights the challenges in identifying shocks due to factors like foresight, trends, and nonlinearities. The paper also examines various identification methods, such as Cholesky decompositions, narrative methods, and external instruments, and their applications in estimating impulse responses. It emphasizes the importance of distinguishing between exogenous shocks and endogenous responses, and the role of data and models in understanding the sources of economic fluctuations. The paper concludes that significant progress has been made in understanding the shocks driving economic fluctuations, with technology shocks playing a central role. It also discusses additional shocks like oil and credit shocks, and concludes that the leading shocks can explain a substantial portion of economic fluctuations. The paper underscores the importance of methodological innovations in improving our understanding of macroeconomic dynamics.Valerie A. Ramey's NBER working paper explores the identification of macroeconomic shocks and their propagation mechanisms. The paper reviews recent innovations in identifying shocks, including monetary, fiscal, and technology shocks, and discusses their implications for economic fluctuations. It highlights the challenges in identifying shocks due to factors like foresight, trends, and nonlinearities. The paper also examines various identification methods, such as Cholesky decompositions, narrative methods, and external instruments, and their applications in estimating impulse responses. It emphasizes the importance of distinguishing between exogenous shocks and endogenous responses, and the role of data and models in understanding the sources of economic fluctuations. The paper concludes that significant progress has been made in understanding the shocks driving economic fluctuations, with technology shocks playing a central role. It also discusses additional shocks like oil and credit shocks, and concludes that the leading shocks can explain a substantial portion of economic fluctuations. The paper underscores the importance of methodological innovations in improving our understanding of macroeconomic dynamics.