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Output Dynamics of the G7 Countries - Stochastic Trends and Cyclical Movements

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  • Yin-Wong Cheung
  • Frank Westermann

Abstract

Using a time series framework, the paper studies the interac tions of the annual real per capita GDP data of the G7 countries. We find evidence of six common nonstationary processes behind the international output dynamics. In addition, there is evidence for the existence of a common business cycle among these coun t ries. The trend and cycle components of each output series are obtained with a procedure that accounts for the presence of both the common nonstationary and cyclical factors. It is found that the relative variability and the correlation of the trend and cycle components are not similar across the G7 countries.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 220.

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Date of creation: 1999
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Handle: RePEc:ces:ceswps:_220

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  1. Cheung, Yin-Wong, 1994. "Aggregate output dynamics in the twentieth century," Economics Letters, Elsevier, Elsevier, vol. 45(1), pages 15-22, May.
  2. John Y. Campbell & N. Gregory Mankiw, 1988. "International Evidence on the Persistence of Economic Fluctuations," NBER Working Papers 2498, National Bureau of Economic Research, Inc.
  3. Robin L. Lumsdaine & Eswar S. Prasad, 1997. "Identifying the Common Component in International Economic Fluctuations," NBER Working Papers 5984, National Bureau of Economic Research, Inc.
  4. Glick, Reuven & Rogoff, Kenneth, 1995. "Global versus country-specific productivity shocks and the current account," Journal of Monetary Economics, Elsevier, Elsevier, vol. 35(1), pages 159-192, February.
  5. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  6. Bernard, A.B. & Durlauf, S.N., 1993. "Convergence in International Output," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 93-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 11(4), pages 369-80, October.
  8. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  9. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
  10. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  11. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, Econometric Society, vol. 59(6), pages 1551-80, November.
  12. Bernard, A.B. & Durlauf, S.N., 1994. "Interpreting Tests of the Convergence Hypothesis," Working papers, Wisconsin Madison - Social Systems 9401r, Wisconsin Madison - Social Systems.
  13. Lucke, Bernd, 1998. "Productivity shocks in a sectoral real business cycle model for West Germany," European Economic Review, Elsevier, Elsevier, vol. 42(2), pages 311-327, February.
  14. Alan M. Taylor, 1996. "Sources of Convergence in the Late Nineteenth Century," NBER Working Papers 5806, National Bureau of Economic Research, Inc.
  15. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 251-76, March.
  16. Kwark, Noh-Sun, 1999. "Sources of international business fluctuations: Country-specific shocks or worldwide shocks?," Journal of International Economics, Elsevier, Elsevier, vol. 48(2), pages 367-385, August.
  17. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 11(4), pages 393-95, October.
  18. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1345-70, November.
  19. Canova, Fabio & Marrinan, Jane, 1998. "Sources and propagation of international output cycles: Common shocks or transmission?," Journal of International Economics, Elsevier, Elsevier, vol. 46(1), pages 133-166, October.
  20. Engle, Robert F. & Issler, Joao Victor, 1995. "Estimating common sectoral cycles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 35(1), pages 83-113, February.
  21. Canova, Fabio & Dellas, Harris, 1993. "Trade interdependence and the international business cycle," Journal of International Economics, Elsevier, Elsevier, vol. 34(1-2), pages 23-47, February.
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Citations

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Cited by:
  1. Yin-Wong Cheung, 2000. "Hong Kong Output Dynamics: An Empirical Analysis," Working Papers, Hong Kong Institute for Monetary Research 112000, Hong Kong Institute for Monetary Research.
  2. Mario Forno & Marco Lippi & Lucrezia Reichlin & Filippo Altissimo & Antonio Bassanetti, 2003. "Eurocoin: A Real Time Coincident Indicator Of The Euro Area Business Cycle," Computing in Economics and Finance 2003, Society for Computational Economics 242, Society for Computational Economics.
  3. Pei-Long Shen & Chih-Wei Su & Hsu-Ling Chang, 2013. "Are real GDP levels nonstationary across Central and Eastern European countries?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, Baltic International Centre for Economic Policy Studies, vol. 13(1), pages 99-108, July.
  4. Tsangyao Chang & Chia-Hao Lee & Pei-I Chou, 2012. "Is per capita real GDP stationary in five southeastern European countries? Fourier unit root test," Empirical Economics, Springer, Springer, vol. 43(3), pages 1073-1082, December.
  5. Centoni, Marco & Cubadda, Gianluca & Hecq, Alain, 2006. "Measuring the Sources of Cyclical Fluctuations in the G7 Economies," Economics & Statistics Discussion Papers esdp06028, University of Molise, Dept. EGSeI.
  6. Centoni, Marco & Cubadda, Gianluca & Hecq, Alain, 2003. "Common Shocks, Common Dynamics, and the International Business Cycle," Economics & Statistics Discussion Papers esdp03007, University of Molise, Dept. EGSeI.
  7. Chang, Tsangyao & Chu, Hsiao-Ping & Ranjbar, Omid, 2014. "Are GDP fluctuations transitory or permanent in African countries? Sequential Panel Selection Method," International Review of Economics & Finance, Elsevier, Elsevier, vol. 29(C), pages 380-399.
  8. Nannette Lindenberg & Frank Westermann, 2009. "Common Trends and Common Cycles among Interest Rates of the G7-Countries," CESifo Working Paper Series 2532, CESifo Group Munich.
  9. Bicu Andreea & Candelon Bertrand, 2012. "Government bond market dynamics and sovereign risk: systemic or idiosyncratic?," Research Memorandum 032, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  10. Tsangyao Chang & Hsu-Ling Chang & Hsiao-Ping Chu & Chi-Wei Su, 2006. "Is per capita real GDP stationary in African countries? Evidence from panel SURADF test," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(15), pages 1003-1008.
  11. Lee, Kuei-Chiu, 2014. "Is per capita real GDP stationary in China? Sequential panel selection method," Economic Modelling, Elsevier, Elsevier, vol. 37(C), pages 507-517.

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