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Business Cycle Volatility in Germany

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  • Claudia M. Buch
  • Joerg Doepke
  • Christian Pierdzioch

Abstract

Stylized facts suggest that output volatility in OECD countries has declined in recent years. However, the causes and the nature of this decline have so far been analyzed mainly for the United States. In this paper, we analyze whether structural breaks in the dynamics and the volatility of the real output process in Germany can be detected. We report evidence that output volatility has declined in Germany. Yet, this decline in output volatility is not as clear-cut as it is in the case of the United States. In consequence, it is difficult to answer the question whether the decline in output volatility in Germany reflects good economic and monetary policy or merely ‘good luck’.

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1129.

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Length: 32 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:kie:kieliw:1129

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Keywords: Business Cycle; Volatility; Germany;

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References

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  1. Robert Buckle & David Haugh & Peter Thomson, 2003. "Calm after the storm? Supply-side contributions to New Zealand's GDP volatility decline," New Zealand Economic Papers, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(2), pages 217-243.
  2. Gabriel Perez-Quiros & Margaret M. McConnell, 2000. "Output Fluctuations in the United States: What Has Changed since the Early 1980's?," American Economic Review, American Economic Association, American Economic Association, vol. 90(5), pages 1464-1476, December.
  3. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  4. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 13(2), pages 45-68, Spring.
  5. Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 34(01), pages 33-55, March.
  6. Thomas Dalsgaard & Jørgen Elmeskov & Cyn-Young Park, 2002. "Ongoing Changes in the Business Cycle: Evidence and Causes," OECD Economics Department Working Papers, OECD Publishing 315, OECD Publishing.
  7. Bergman, U. Michael & Bordo, Michael D. & Jonung, Lars, 1998. "Historical Evidence on Business Cycles: The International Experience," Working Paper Series in Economics and Finance, Stockholm School of Economics 255, Stockholm School of Economics.
  8. Choi, Seungmook & Kim, Benjamin J. C., 1991. "Monetary policy regime changes and the risk premium in the foreign exchange markets : A GARCH application," Economics Letters, Elsevier, Elsevier, vol. 37(4), pages 447-452, December.
  9. James, John A, 1993. "Changes in Economic Instability in 19th-Century America," American Economic Review, American Economic Association, American Economic Association, vol. 83(4), pages 710-31, September.
  10. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  11. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  12. Nathan S. Balke & Kenneth M. Emery, 1994. "Understanding the price puzzle," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Q IV, pages 15-26.
  13. John Simon, 2001. "The Decline in Australian Output Volatility," RBA Research Discussion Papers, Reserve Bank of Australia rdp2001-01, Reserve Bank of Australia.
  14. Shaghil Ahmed & Andrew Levin & Beth Anne Wilson, 2002. "Recent U.S. macroeconomic stability: good policies, good practices or good luck?," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 730, Board of Governors of the Federal Reserve System (U.S.).
  15. Kneller, Richard & Young, Garry, 2001. "Business Cycle Volatility, Uncertainty and Long-Run Growth," Manchester School, University of Manchester, University of Manchester, vol. 69(5), pages 534-52, Special I.
  16. Lastrapes, William D, 1989. "Exchange Rate Volatility and U.S. Monetary Policy: An ARCH Application," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 21(1), pages 66-77, February.
  17. Jean Boivin & Marc Giannoni, 2002. "Assessing changes in the monetary transmission mechanism: a VAR approach," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue May, pages 97-111.
  18. Alexandre Debs, 2001. "Testing for a Structural Break in the Volatility of Real GDP Growth in Canada," Working Papers, Bank of Canada 01-9, Bank of Canada.
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Citations

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Cited by:
  1. Claudia Buch & Martin Schlotter, 2013. "Regional origins of employment volatility: evidence from German states," Empirica, Springer, Springer, vol. 40(1), pages 1-19, February.
  2. Klaus Weyerstrass & Bas Aarle & Marcus Kappler & Atilim Seymen, 2011. "Business Cycle Synchronisation with(in) the Euro Area: in Search of a ‘Euro Effect’," Open Economies Review, Springer, Springer, vol. 22(3), pages 427-446, July.
  3. Timm Bönke & Carsten Schröder & Katharina Schulte, 2010. "Incomes and Inequality in the Long Run: The Case of German Elderly," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 11, pages 487-510, November.
  4. William Martin & Robert Rowthorn, 2004. "Will Stability Last?," CESifo Working Paper Series 1324, CESifo Group Munich.
  5. Ulrich Fritsche & Vladimir Kuzin, 2005. "Declining Output Volatility in Germany: Impulses, Propagation, and the Role of the Monetary Policy," Money Macro and Finance (MMF) Research Group Conference 2005, Money Macro and Finance Research Group 70, Money Macro and Finance Research Group.
  6. Christian Aßmann & Jens Hogrefe & Roman Liesenfeld, 2009. "The decline in German output volatility: a Bayesian analysis," Empirical Economics, Springer, Springer, vol. 37(3), pages 653-679, December.
  7. Sandra Bilek-Steindl, 2011. "On the Change in the Austrian Business Cycle," WIFO Working Papers, WIFO 384, WIFO.
  8. Strotmann, Harald & Döpke, Jörg & Buch, Claudia M., 2006. "Does trade openness increase firm-level volatility?," Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank, Research Centre 2006,40, Deutsche Bundesbank, Research Centre.
  9. Michael A. Flor, 2014. "Post Reunification Economic Fluctuations in Germany: A Real Business Cycle Interpretation," Discussion Paper Series, Universitaet Augsburg, Institute for Economics 324, Universitaet Augsburg, Institute for Economics.
  10. Ulrich Fritsche & Vladimir Kuzin, 2005. "Declining output volatility in Germany: impulses, propagation, and the role of monetary policy," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(21), pages 2445-2457.

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