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The structural dynamics of output growth and inflation: some international evidence

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  • Fabio Canova

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  • Luca Gambetti
  • Evi Pappa

Abstract

We examine the dynamics of output growth and inflation in the US, Euro area and UK using a structural time varying coefficient VAR. There are important similarities in structural inflation dynamics across countries; output growth dynamics differ. Swings in the magnitude of inflation and output growth volatilities and persistences are accounted for by a combination of three structural shocks. Changes over time in the structure of the economy are limited and permanent variations largely absent. Changes in the volatilities of structural shocks matter.

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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 971.

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Date of creation: Apr 2006
Date of revision: Aug 2006
Handle: RePEc:upf:upfgen:971

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

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Keywords: Variability; Persistence; Transmission; Structural time varying VARs;

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  1. Canova, Fabio & Gambetti, Luca, 2006. "Structural Changes in the US Economy: Bad Luck or Bad Policy?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5457, C.E.P.R. Discussion Papers.
  2. Gordon, Robert J, 2004. "Two Centuries of Economic Growth: Europe Chasing the American Frontier," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4415, C.E.P.R. Discussion Papers.
  3. Jaimovich, Nir & Rebelo, Sérgio, 2006. "Can News About the Future Drive the Business Cycle?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5877, C.E.P.R. Discussion Papers.
  4. O'Reilly,Gerard & Whelan, Karl, 2004. "Has Euro-Area Inflation Persistence Changed Over Time?," Research Technical Papers 4/RT/04, Central Bank of Ireland.
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  7. Fabio Canova & Matteo Ciccarelli & Eva Ortega, 2003. "Similarities and convergence in G-7 cycles," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 924, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2004.
  8. Thomas Lubik & Frank Schorfheide, 2002. "Testing for Indeterminacy:An Application to U.S. Monetary Policy," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 480, The Johns Hopkins University,Department of Economics, revised Jun 2003.
  9. Nicoletta Batini, 2006. "Euro area inflation persistence," Empirical Economics, Springer, Springer, vol. 31(4), pages 977-1002, November.
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  11. Haroon Mumtaz & Paolo Surico, 2012. "Evolving International Inflation Dynamics: World And Country-Specific Factors," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 10(4), pages 716-734, 08.
  12. Gadzinski, Gregory & Orlandi, Fabrice, 2004. "Inflation persistence in the European Union, the euro area, and the United States," Working Paper Series, European Central Bank 0414, European Central Bank.
  13. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1993. "Nonlinear Dynamic Structures," Econometrica, Econometric Society, Econometric Society, vol. 61(4), pages 871-907, July.
  14. Christopher A. Sims & Tao Zha, 2005. "Were There Regime Switches in U.S. Monetary Policy?," Working Papers, Princeton University, Department of Economics, Center for Economic Policy Studies. 92, Princeton University, Department of Economics, Center for Economic Policy Studies..
  15. Evi Pappa, 2005. "New Keynesian or RBC Transmission? The Effects of Fiscal Policy in Labor Markets," Working Papers 293, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  16. Koop, Gary, 1996. "Parameter uncertainty and impulse response analysis," Journal of Econometrics, Elsevier, Elsevier, vol. 72(1-2), pages 135-149.
  17. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 27(1), pages 129-147, February.
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