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Changes in variability of the business cycle in the G7 countries

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Author Info

  • van Dijk, D.J.C.
  • Osborn, D.R.
  • Sensier, M.

Abstract

Volatility breaks are tested and documented for 19 important monthly macroeconomic time series across the G7 countries. Across all conditional mean specifications considered, including both linear and nonlinear models with and without a structural break, volatility breaks are found to be widespread. This continues to hold when business cycle nonlinearities are allowed in the variance. Multiple volatility breaks are also examined, and these are found to be especially prevalent for short-term interest rates. Volatility breaks in industrial production and consumer prices are largely synchronous across the G7. The facts established are discussed in the context of some explanations put forward in the literature to explain volatility breaks previously found for US series.

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File URL: http://repub.eur.nl/pub/551/feweco20020919164617.pdf
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Bibliographic Info

Paper provided by Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute in its series Econometric Institute Research Papers with number EI 2002-28.

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Date of creation: 19 Sep 2002
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Handle: RePEc:ems:eureir:551

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Related research

Keywords: Business cycle nonlinearity; Growth; Structural change tests; Volatility;

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References

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  9. Bruce E. Hansen, 1995. "Approximate Asymptotic P-Values for Structural Change Tests," Boston College Working Papers in Economics 297., Boston College Department of Economics.
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Citations

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Cited by:
  1. Giuseppe Cavaliere & Anders Rahbek & A. M. Robert Taylor, 2007. "Testing for co-integration in vector autoregressions with non-stationary volatility," Discussion Papers 07/02, University of Nottingham, Granger Centre for Time Series Econometrics.
  2. Brian M. Doyle & Jon Faust, 2003. "Breaks in the variability and co-movement of G-7 economic growth," International Finance Discussion Papers 786, Board of Governors of the Federal Reserve System (U.S.).
  3. Cavaliere Giuseppe & Phillips Peter C.B. & Smeekes Stephan & Taylor A.M. Robert, 2011. "Lag Length Selection for Unit Root Tests in the Presence of Nonstationary Volatility," Research Memorandum 056, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  4. William Martin & Robert Rowthorn, 2004. "Will Stability Last?," CESifo Working Paper Series 1324, CESifo Group Munich.
  5. Ke-Li Xu & Peter C.B. Phillips, 2006. "Adaptive Estimation of Autoregressive Models with Time-Varying Variances," Cowles Foundation Discussion Papers 1585, Cowles Foundation for Research in Economics, Yale University.
  6. Ossama Mikhail, 2004. "No More Rocking Horses: Trading Business-Cycle Depth for Duration Using an Economy-Specific Characteristic," Macroeconomics 0402026, EconWPA.
  7. Cavaliere, Giuseppe & Taylor, A.M. Robert, 2007. "Testing for unit roots in time series models with non-stationary volatility," Journal of Econometrics, Elsevier, vol. 140(2), pages 919-947, October.
  8. Ossama Mikhail, 2006. "Trading Business-Cycle Depth for Duration using an economy-specific characteristic," Economics Bulletin, AccessEcon, vol. 5(7), pages 1-12.
  9. Peter M. Summers, 2005. "What caused the Great Moderation? : some cross-country evidence," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-32.

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