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The Cyclical Dynamics and Volatility of Australian Output and Employment

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  • DAVID SHEPHERD
  • ROBERT DIXON

Abstract

In this paper, we examine the volatility of aggregate output and employment in Australia with the aid of a frequency filtering method. This analysis is compared with more traditional methods based on the examination of first differences in the logs of the raw data. We show that the application of univariate AR and bivariate VECM methods to the data results in a detrended series which is dominated by noise and gives break points which are not robust to alternative decomposition methods. When we apply a frequency filtered procedure we find that the detrended series is dominated by cyclical rather than noise variation. We find evidence of a sustained reduction in the cyclical volatility of both the gross domestic product and employment series in 1993-1994, not in 1984. We also find that there is a clear association between output volatility and employment volatility. Copyright © 2008 The Economic Society of Australia.

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Article provided by The Economic Society of Australia in its journal Economic Record.

Volume (Year): 84 (2008)
Issue (Month): 264 (03)
Pages: 34-49

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Handle: RePEc:bla:ecorec:v:84:y:2008:i:264:p:34-49

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Cited by:
  1. Sahin, Afsin & Tansel, Aysit & Berument, Hakan, 2013. "Output-Employment Relationship across Sectors: A Long- versus Short-Run Perspective," IZA Discussion Papers 7599, Institute for the Study of Labor (IZA).
  2. Robert Dixon & David Shepherd, 2009. "Regional Dimensions of the Australian Business Cycle," Department of Economics - Working Papers Series 1088, The University of Melbourne.
  3. David Shepherd & Robert Dixon, 2010. "The not-so-great moderation? Evidence on changing volatility from Australian regions," Department of Economics - Working Papers Series 1090, The University of Melbourne.

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