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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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-1999/WP220.PDF
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Bibliographic Info

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. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Reuven Glick & Kenneth Rogoff, 1993. "Global Versus Country-Specific Productivity Shocks and the Current Acocount," Boston University - Institute for Economic Development 31, Boston University, Institute for Economic Development.
  3. Bernard, A.B. & Durlauf, S.N., 1994. "Interpreting Tests of the Convergence Hypothesis," Working papers 9401r, Wisconsin Madison - Social Systems.
  4. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  5. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  6. Robert F. Engle & Sharon Kozicki, 1990. "Testing For Common Features," NBER Technical Working Papers 0091, National Bureau of Economic Research, Inc.
  7. Alan M. Taylor, 1996. "Sources of Convergence in the Late Nineteenth Century," NBER Working Papers 5806, National Bureau of Economic Research, Inc.
  8. Steven N. Durlauf & Danny T. Quah, 1998. "The New Empirics of Economic Growth," NBER Working Papers 6422, National Bureau of Economic Research, Inc.
  9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  10. Canova, Fabio & Dellas, Harris, 1993. "Trade interdependence and the international business cycle," Journal of International Economics, Elsevier, vol. 34(1-2), pages 23-47, February.
  11. Cheung, Yin-Wong, 1994. "Aggregate output dynamics in the twentieth century," Economics Letters, Elsevier, vol. 45(1), pages 15-22, May.
  12. Mankiw, N. Gregory & Campbell, John, 1989. "International Evidence on the Persistence of Economic Fluctuations," Scholarly Articles 3224417, Harvard University Department of Economics.
  13. 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.
  14. Lucke, Bernd, 1998. "Productivity shocks in a sectoral real business cycle model for West Germany," European Economic Review, Elsevier, vol. 42(2), pages 311-327, February.
  15. Canova, Fabio & Marrinan, Jane, 1998. "Sources and propagation of international output cycles: Common shocks or transmission?," Journal of International Economics, Elsevier, vol. 46(1), pages 133-166, October.
  16. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  17. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
  18. 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.
  19. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
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Cited by:
  1. Centoni, Marco & Cubadda, Gianluca & Hecq, Alain, 2007. "Common shocks, common dynamics, and the international business cycle," Economic Modelling, Elsevier, vol. 24(1), pages 149-166, January.
  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 242, Society for Computational Economics.
  3. Nannette Lindenberg & Frank Westermann, 2009. "Common Trends and Common Cycles among Interest Rates of the G7-Countries," Working Papers 77, Institute of Empirical Economic Research.
  4. Yin-Wong Cheung, 2001. "Hong Kong Output Dynamics: An Empirical Analysis," CESifo Working Paper Series 482, CESifo Group Munich.
  5. 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 and Francis Journals, vol. 13(15), pages 1003-1008.
  6. Centoni, Marco & Cubadda, Gianluca & Hecq, Alain, 2007. "Measuring the Sources of Cyclical Fluctuations in the G7 Economies," Open Access publications from Maastricht University urn:nbn:nl:ui:27-15773, Maastricht University.
  7. Bicu Andreea & Candelon Bertrand, 2012. "Government bond market dynamics and sovereign risk: systemic or idiosyncratic?," Research Memoranda 032, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.

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