18 research outputs found
A Critical Note on the Forecast Error Variance Decomposition
The paper questions the reasonability of using forecast error variance decompositions for assessing the role of different structural shocks in business cycle fluctuations. It is shown that the forecast error variance decomposition is related to a dubious definition of the business cycle. A historical variance decomposition approach is proposed to overcome the problems related to the forecast error variance decomposition. --Business Cycles,Structural Vector Autoregression Models,Forecast Error Variance Decomposition,Historical Variance Decomposition
Business Cycle Dynamics in the Euro Area: A Factor-SVAR Approach
The study investigates the business cycle dynamics in the euro area using an empirical framework which comprises common global and euro area shocks as well as allows bilateral spillovers of country-specific shocks across the member economies. Three core questions lie at the heart of the analysis: (i) To what extent are the business cycles of the euro area countries driven by common and spillover shocks? (ii) What are the extent and sources of business cycle heterogeneity in the euro area? (iii) Which mechanisms led to the moderation of business cycle activity in the euroarea until recently?Euro Area Business Cycles, Common and Country-Specific Shocks, Spillovers, Factor-Structural Vector Autoregression
The role of structural common and country-specific shocks in the business cycle dynamics of the G7 countries
The study analyses the business cycles of the G7 countries in a structural vector autoregression(SVAR) framework comprising output, nominal interest rate and inflation. Common and country-specific supply, demand and nominal shocks of each G7 country are identified, and the corresponding shock propagation channels are computed. We establish the statistical properties of the cyclical fluctuations and investigate the role of each structural common and country-specific shock in the cyclical fluctuations of the variables of interest as well as the business cycle co-movement in the G7 group of countries. --International Business Cycles,Common and Country-Specific Structural Shocks,Structural Vector Autoregression Models
A critical note on the forecast error variance decomposition
The paper questions the reasonability of using forecast error variance decompositions for assessing the role of different structural shocks in business cycle fluctuations. It is shown that the forecast error variance decomposition is related to a dubious definition of the business cycle. A historical variance decomposition approach is proposed to overcome the problems related to the forecast error variance decomposition
Sequential identification of technological news shocks
In an influential recent paper, Beaudry and Portier (2006) propose a sequential approach for identifying
technological news shocks. Thereby, the correlation coefficient between news shocks of a
short-run identification scheme and technology shocks of a long-run identification scheme in the
VAR framework measures the extent to which news incorporated into forward-looking variables
could reflect future technological developments. While structural VARs can potentially provide a
useful guide for modelers as well as policy-makers, the ability of such models to recuperate structural
shocks in general and news shocks in particular from the data is a contentious issue in the
literature. In the current paper, I find by means of Monte Carlo simulations that the sequential
approach can be quite successful in recuperating technological news shocks from artificial data
A Comparative Study on the Role of Stochastic Trends in U.S. Macroeconomic Fluctuations, 1954-1988
The paper attempts to provide an appropriate model specification for identifying technology and other macroeconomic shocks in a structural VAR framework. The investigation is conducted based on two seminal structural VAR studies by Gali (1999) and King et al. (1991). The models of these studies are compared and contrasted, and then modified based on the findings. The analysis builds on two studies of Alexius and Carlsson (2001, 2005) that examine the ability of structural VAR models to identify technology shocks. The original and augmented models are used for investigating the driving forces behind business cycle fluctuations. --Structural Vector Autoregression,Long-Run Restrictions,Error Variance Decomposition
The effects of countercyclical fiscal policy: firm-level evidence from temporary consumption tax cuts in Turkey
The paper investigates the effects of temporary consumption tax cuts using firm-level data. As
part of its countercyclical measures implemented during the recent global economic crisis, Turkey
temporarily lowered consumption taxes on selected durables. Using data on the change of
sales of firms that benefited from this measure and of those that did not over different periods,
we perform a difference-in-difference analysis where we also control for various unobservable
effects including sector-specific shocks to address potential endogeneity. We find positive and
robust effects of consumption tax cuts on the change of firm sales which is consistent with theoretical
predictions
The role of structural common and country-specific shocks in the business cycle dynamics of the G7 countries
The study analyses the business cycles of the G7 countries in a structural vector autoregression(SVAR) framework comprising output, nominal interest rate and inflation. Common and country-specific supply, demand and nominal shocks of each G7 country are identified, and the corresponding shock propagation channels are computed. We establish the statistical properties of the cyclical fluctuations and investigate the role of each structural common and country-specific shock in the cyclical fluctuations of the variables of interest as well as the business cycle co-movement in the G7 group of countries
The German labour market reforms in a European context : a DSGE analysis
While a widespread consensus exists among macroeconomists that the German labour market
reforms in 2003-2005 have successfully contributed to the decline of the unemployment rate, critics
claim that the reforms led to wage restraint and consequently consumption dampening accompanied
by beggar-thy-neighbour effects, harming Germany’s trade partners. We check up on the validity of
these arguments by means of a two-country DSGE model featuring intra-industry trade and labour
market frictions. Our results suggest that the disproportional growth of GDP (labour productivity)
in comparison to consumption (wages) are only partially driven by the reforms. However, we do
not find that the reforms contribute to Germany’s trade surplus and cause negative spillovers to
trading partners in terms of output and employment
A comparative study on the role of stochastic trends in U.S. macroeconomic fluctuations, 1954-1988
The paper attempts to provide an appropriate model specification for identifying technology and other macroeconomic shocks in a structural VAR framework. The investigation is conducted based on two seminal structural VAR studies by Gali (1999) and King et al. (1991). The models of these studies are compared and contrasted, and then modified based on the findings. The analysis builds on two studies of Alexius and Carlsson (2001, 2005) that examine the ability of structural VAR models to identify technology shocks. The original and augmented models are used for investigating the driving forces behind business cycle fluctuations