Abstract: The paper finds that shocks which have no contemporaneous effect on the price level explain almost all the variance of aggregate output in the short run. Similar results are obtained with sectoral and industry-level data. Seasonally adjusted data and not seasonally adjusted data obtain essentially the same results. A second model identifies shocks that don't affect prices for at least two months. These shocks are significantly more important for aggregate output than shocks which affect the price level immediately or with a one-month delay. A third model finds that most of the variance of aggregate output over the business cycle is explained by shocks which have no contemporaneous effect on the price level and no long-run effect on output. This finding is interpreted as evidence to support the hypothesis that sticky price adjustment is an important factor in causing aggregate demand shocks to have real effects. Economic models in which prices adjust rapidly to clear markets will have difficulty explaining all the empirical results found in this paper.