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Tracking down the business cycle: A dynamic factor model for Germany 1820-1913

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  • Sarferaz, Samad
  • Uebele, Martin

Abstract

We use a Bayesian dynamic factor model in order to calculate an economic activity index for Germany prior to World War I. The procedure allows us to incorporate information from a vast number of time series, which are underutilized by historical national accounts. Therefore, our indicator provides an alternative measure for economic activity, based on a broader database. To investigate industrialization, we compare our aggregate measure of economic activity with sectoral activity indices. We find that the industrial transition was completed earlier than agricultural output and employment shares suggest, since the indicator for agriculture had already decoupled from the aggregate business cycle measure during the 1860s. Moreover, we find that stock prices are strongly correlated with our indicator, and lead it by 1-2 years.

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Bibliographic Info

Article provided by Elsevier in its journal Explorations in Economic History.

Volume (Year): 46 (2009)
Issue (Month): 3 (July)
Pages: 368-387

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Handle: RePEc:eee:exehis:v:46:y:2009:i:3:p:368-387

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Web page: http://www.elsevier.com/locate/inca/622830

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Keywords: Business cycle chronology Imperial Germany Dynamic factor models Industrialization;

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References

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  14. Ulrich Woitek, 1998. "A Note on the Baxter-King Filter," Working Papers 9813, Business School - Economics, University of Glasgow.
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Citations

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Cited by:
  1. Uebele, Martin & Pfister, Ulrich & Riedel, Jana, 2012. "Real wages and the origins of modern economic growth in Germany, 16th to 19th centuries," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62076, Verein für Socialpolitik / German Economic Association.
  2. Ritschl, Albrecht & Sarferaz, Samad & Uebele, Martin, 2008. "The U.S. Business Cycle, 1867-1995: A Dynamic Factor Approach," CEPR Discussion Papers 7069, C.E.P.R. Discussion Papers.
  3. Ritschl, Albrecht & Uebele, Martin, 2005. "Stock Markets and Business Cycle Comovement in Germany Before World War I: Evidence from Spectral Analysis," CEPR Discussion Papers 5370, C.E.P.R. Discussion Papers.

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