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Germany and the European Business Cycle - An Analysis of Causal Relations in an International Real Business Cycle Model

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  • Ferdinand Fichtner

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Abstract

This paper studies the role of the German economy for the existence of the so called European business cycle, a term referring to the regularly observed synchronization of the national business cycles in Europe. Using a three-country general equilibrium model, we are able to simulate impulse response functions mimicking the important features observed in the data. Focusing on the importance of shocks affecting the German GDP we show that trade-related transmission from Germany to the other European economies is only of minor importance for the synchronization of national business cycles. On the contrary, our findings suggest that the influence of common shocks and of technology spillovers accounts for most of the parallels in economic performance.

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Bibliographic Info

Paper provided by Institute for Economic Policy, Cologne, Germany in its series IWP Discussion Paper Series with number 01/2003.

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Length: 24 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:kln:iwpdip:dp01/03

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Keywords: European business cycle; Transmission; Open economy macroeconomics; Real business cycles;

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  1. Finn E. Kydland & Edward C. Prescott, 1994. "The computational experiment: an econometric tool," Staff Report 178, Federal Reserve Bank of Minneapolis.
  2. David K. Backus & Patrick J. Kehoe, 1991. "International evidence on the historical properties of business cycles," Staff Report 145, Federal Reserve Bank of Minneapolis.
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  4. Allan W. Gregory & Allen C. Head & Jacques Raynauld, 1994. "Measuring World Business Cycles," Working Papers 902, Queen's University, Department of Economics.
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  15. Anderson, H.M. & Kwark, N.-S. & Vahid, F., 1999. "Does International Trade Synchronize Business Cycles?," Monash Econometrics and Business Statistics Working Papers 8/99, Monash University, Department of Econometrics and Business Statistics.
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  18. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1, July.
  19. 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.
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  21. Cantor, Richard & Mark, Nelson C, 1988. "The International Transmission of Real Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 493-507, August.
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  23. Mills, Terence C & Holmes, Mark J, 1999. "Common Trends and Cycles in European Industrial Production: Exchange Rate Regimes and Economic Convergence," Manchester School, University of Manchester, vol. 67(4), pages 557-87, September.
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Cited by:
  1. Christian Richter & Andrew Hughes Hallett, 2005. "A Time-Frequency Analysis of the Coherences of the US Business," Computing in Economics and Finance 2005 45, Society for Computational Economics.
  2. Paul Hallwood & Ian W. Marsh & Joerg Scheibe, 2004. "An Assessment of the Case for Monetary Union or Official Dollarization in Argentina, Brazil, Chile, Uruguay and Venezuela," Working papers 2004-13, University of Connecticut, Department of Economics.

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