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Declining output volatility in Germany: impulses, propagation, and the role of monetary policy

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  • Ulrich Fritsche
  • Vladimir Kuzin

Abstract

The decline in output volatility in Germany is analysed. A lower level of variance in an autoregressive model of output growth can be either due to a change in the structure of the economy (a change in the propagation mechanism) or a reduced error term variance (reduced impulses). In Germany the decline output volatility is due to a decline in the persistence of the growth process. This is in contrast to the US results, where a break in the variance seems to dominate the decline in persistence. A change in the conduct of monetary policy (the establishment of another monetary policy regime) could be part of an explanation for the change in propagation. Stochastic simulations with a New Keynesian DSGE model support the hypothesis.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 37 (2005)
Issue (Month): 21 ()
Pages: 2445-2457

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Handle: RePEc:taf:applec:v:37:y:2005:i:21:p:2445-2457

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Cited by:
  1. Christian Aßmann & Jens Hogrefe & Roman Liesenfeld, 2009. "The decline in German output volatility: a Bayesian analysis," Empirical Economics, Springer, vol. 37(3), pages 653-679, December.

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