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On the sources of business cycles in the G-7

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  • Fabio Canova

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  • Gianni de Nicoló

Abstract

This paper examines sources of cyclical movements in output, inflation and the term structure of interest rates. It employs a novel identification approach which uses the sign of the cross correlation function in response to shocks to catalog orthogonal disturbances. We find that demand shocks are the dominant source output, inflation and term structure fluctuations in six of the G-7 countries. Within the class of demand disturbances, nominal shocks are dominant, but their importance declined after 1982. Furthermore, there are no significant differences in the proportion of term structure variability explained by different structural sources at different horizons.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 459.

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Date of creation: Oct 1999
Date of revision: Mar 2000
Handle: RePEc:upf:upfgen:459

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Web page: http://www.econ.upf.edu/

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Keywords: Structural shocks; business cycles; demand disturbances; dynamic correlations; impulse responses;

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