IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/1129.html
   My bibliography  Save this paper

Business Cycle Volatility in Germany

Author

Listed:
  • Buch, Claudia M.
  • Doepke, Joerg
  • Pierdzioch, Christian

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?.

Suggested Citation

  • Buch, Claudia M. & Doepke, Joerg & Pierdzioch, Christian, 2002. "Business Cycle Volatility in Germany," Kiel Working Papers 1129, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1129
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/17797/1/kap1129.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. U. Michael Bergman & Michael D. Bordo & Lars Jonung, 1998. "Historical evidence on business cycles: the international experience," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 42(Jun), pages 65-119.
    2. Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(1), pages 33-55, March.
    3. Ben S. Bernanke & Julio J. Rotemberg (ed.), 1997. "NBER Macroeconomics Annual 1997," MIT Press Books, The MIT Press, edition 1, volume 1, number 026252242x, December.
    4. 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.
    5. 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, vol. 37(2), pages 217-243.
    6. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 45-68, Spring.
    7. 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, vol. 37(4), pages 447-452, December.
    8. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348, National Bureau of Economic Research, Inc.
    9. Berry Wilson & Reena Aggarwal & Carla Inclan, 1996. "Detecting volatility changes across the oil sector," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(3), pages 313-330, May.
    10. John Simon, 2001. "The Decline in Australian Output Volatility," RBA Research Discussion Papers rdp2001-01, Reserve Bank of Australia.
    11. 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.
    12. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230, National Bureau of Economic Research, Inc.
    13. Shaghil Ahmed & Andrew Levin & Beth Anne Wilson, 2004. "Recent U.S. Macroeconomic Stability: Good Policies, Good Practices, or Good Luck?," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 824-832, August.
    14. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    15. Nathan S. Balke & Kenneth M. Emery, 1994. "Understanding the price puzzle," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 15-26.
    16. Alexandre Debs, 2001. "Testing for a Structural Break in the Volatility of Real GDP Growth in Canada," Staff Working Papers 01-9, Bank of Canada.
    17. Kneller, Richard & Young, Garry, 2001. "Business Cycle Volatility, Uncertainty and Long-Run Growth," Manchester School, University of Manchester, vol. 69(5), pages 534-552, Special I.
    18. Victor Zarnowitz & Geoffrey H. Moore, 1986. "Major Changes in Cyclical Behavior," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 519-582, National Bureau of Economic Research, Inc.
    19. James, John A, 1993. "Changes in Economic Instability in 19th-Century America," American Economic Review, American Economic Association, vol. 83(4), pages 710-731, September.
    20. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    21. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1, March.
    22. Jean Boivin & Marc Giannoni, 2002. "Assessing changes in the monetary transmission mechanism: a VAR approach," Economic Policy Review, Federal Reserve Bank of New York, vol. 8(May), pages 97-111.
    23. Margaret M. McConnell & Gabriel Perez-Quiros, 2000. "Output fluctuations in the United States: what has changed since the early 1980s?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    24. Lastrapes, William D, 1989. "Exchange Rate Volatility and U.S. Monetary Policy: An ARCH Application," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(1), pages 66-77, February.
    25. Thomas Dalsgaard & Jørgen Elmeskov & Cyn-Young Park, 2002. "Ongoing changes in the business cycle - evidence and causes," SUERF Studies, SUERF - The European Money and Finance Forum, number 20 edited by Morten Balling, May.
    26. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, March.
    27. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ulrich Fritsche & Vladimir Kuzin, 2005. "Declining output volatility in Germany: impulses, propagation, and the role of monetary policy," Applied Economics, Taylor & Francis Journals, vol. 37(21), pages 2445-2457.
    2. Flor Michael, 2014. "Post reunification economic fluctuations in Germany: a real business cycle interpretation," Review of Business and Economics Studies, CyberLeninka;Федеральное государственное образовательное бюджетное учреждение высшего профессионального образования «Финансовый университет при Правительстве Российской Федерации» (Финансовый университет), issue 4, pages 5-17.
    3. 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, vol. 22(3), pages 427-446, July.
    4. Christian Aßmann & Jens Hogrefe & Roman Liesenfeld, 2009. "The decline in German output volatility: a Bayesian analysis," Empirical Economics, Springer, vol. 37(3), pages 653-679, December.
    5. Magnus Reif, 2020. "Macroeconomics, Nonlinearities, and the Business Cycle," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 87.
    6. Eswar S. Prasad & Kenneth Rogoff & Shang-Jin Wei & M. Ayhan Kose, 2007. "Financial Globalization, Growth and Volatility in Developing Countries," NBER Chapters, in: Globalization and Poverty, pages 457-516, National Bureau of Economic Research, Inc.
    7. Bekiros, Stelios & Shahzad, Syed Jawad Hussain & Arreola-Hernandez, Jose & Ur Rehman, Mobeen, 2018. "Directional predictability and time-varying spillovers between stock markets and economic cycles," Economic Modelling, Elsevier, vol. 69(C), pages 301-312.
    8. Bönke Timm & Schröder Carsten & Schulte Katharina, 2010. "Incomes and Inequality in the Long Run: The Case of German Elderly," German Economic Review, De Gruyter, vol. 11(4), pages 487-510, December.
    9. Sandra Bilek-Steindl, 2012. "On the Change in the Austrian Business Cycle," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2012(1), pages 1-18.
    10. Claudia Buch & Martin Schlotter, 2013. "Regional origins of employment volatility: evidence from German states," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 1-19, February.
    11. Magnus Reif, 2022. "Time‐Varying Dynamics of the German Business Cycle: A Comprehensive Investigation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(1), pages 80-102, February.
    12. Buch, Claudia M. & Döpke, Jörg & Stahn, Kerstin, 2008. "Great moderation at the firm level? Unconditional versus conditional output volatility," Discussion Paper Series 1: Economic Studies 2008,13, Deutsche Bundesbank.
    13. Strotmann, Harald & Döpke, Jörg & Buch, Claudia M., 2006. "Does trade openness increase firm-level volatility?," Discussion Paper Series 1: Economic Studies 2006,40, Deutsche Bundesbank.
    14. Hasan Engin Duran, 2019. "Structural change and output volatility reduction in OECD countries: evidence of the Second Great Moderation," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-14, December.
    15. Buch Claudia M & Doepke Joerg & Stahn Kerstin, 2009. "Great Moderation at the Firm Level? Unconditional vs. Conditional Output Volatility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-27, May.
    16. Eduardo A. Cavallo, 2008. "Output Volatility and Openness to Trade: a Reassessment," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2008), pages 105-152, September.
    17. Wolf Heinrich Reuter & Oļegs Tkačevs & Kārlis Vilerts, 2022. "Fiscal rules and volatility: the role of stabilising properties and compliance," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(1), pages 21-52, February.
    18. Konstantin A. Kholodilin & Erik Klär, 2007. "Dem Konjunkturzyklus auf der Spur: zur Prognose konjunktureller Wendepunkte in Deutschland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 76(4), pages 8-20.
    19. William Martin & Robert Rowthorn, 2004. "Will Stability Last?," CESifo Working Paper Series 1324, CESifo.
    20. Strunz, Franziska & Gödl, Maximilian, 2023. "An Evaluation of Professional Forecasts for the German Economy," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277707, Verein für Socialpolitik / German Economic Association.
    21. Gochoco-Bautista, Maria Socorro & Remolona, Eli M., 2012. "Going Regional: How to Deepen ASEAN's Financial Markets," ADB Economics Working Paper Series 300, Asian Development Bank.
    22. Michael Flor, 2014. "Post Reunification Economic Fluctuations in Germany: A Real Business Cycle Interpretation," Working Papers 146, Bavarian Graduate Program in Economics (BGPE).
    23. Claudia M. Buch & Jörg Döpke & Harald Strotmann, 2009. "Does Export Openness Increase Firm‐level Output Volatility?," The World Economy, Wiley Blackwell, vol. 32(4), pages 531-551, April.
    24. Maria Socorro Gochoco‐Bautista & Dennis S. Mapa, 2010. "Linkages between Trade and Financial Integration and Output Growth in East Asia," Asian Economic Journal, East Asian Economic Association, vol. 24(1), pages 1-22, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. William Martin & Robert Rowthorn, 2004. "Will Stability Last?," CESifo Working Paper Series 1324, CESifo.
    2. Mr. Tamim Bayoumi & Ms. Silvia Sgherri, 2004. "Deconstructing the Art of Central Banking," IMF Working Papers 2004/195, International Monetary Fund.
    3. Necati Tekatli, 2007. "Understanding Sources of the Change in International Business Cycles," UFAE and IAE Working Papers 731.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    4. Jean Boivin & Marc P. Giannoni, 2006. "Has Monetary Policy Become More Effective?," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 445-462, August.
    5. Luca Benati, 2003. "Evolving Post-World War II U.K. Economic Performance," Computing in Economics and Finance 2003 171, Society for Computational Economics.
    6. James H. Stock & Mark W. Watson, 2003. "Has the business cycle changed?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 9-56.
    7. Nucci, Francesco & Riggi, Marianna, 2013. "Performance pay and changes in U.S. labor market dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2796-2813.
    8. Luca Gambetti & Jordi Galí, 2009. "On the Sources of the Great Moderation," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 26-57, January.
    9. Dynan, Karen E. & Elmendorf, Douglas W. & Sichel, Daniel E., 2006. "Can financial innovation help to explain the reduced volatility of economic activity?," Journal of Monetary Economics, Elsevier, vol. 53(1), pages 123-150, January.
    10. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed? Evidence and Explanations," Working Papers 2003-2, Princeton University. Economics Department..
    11. Batabyal, Sourav & Islam, Faridul & Khaznaji, Maher, 2018. "On the sources of the Great Moderation: Role of monetary policy and intermediate inputs," Economic Modelling, Elsevier, vol. 74(C), pages 1-9.
    12. Buch, Claudia M. & Doepke, Joerg & Pierdzioch, Christian, 2005. "Financial openness and business cycle volatility," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 744-765, September.
    13. Hasan Engin Duran, 2019. "Structural change and output volatility reduction in OECD countries: evidence of the Second Great Moderation," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-14, December.
    14. Hendrickson, Joshua R., 2012. "An overhaul of Federal Reserve doctrine: Nominal income and the Great Moderation," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 304-317.
    15. JONATHAN McCARTHY & EGON ZAKRAJSEK, 2007. "Inventory Dynamics and Business Cycles: What Has Changed?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 591-613, March.
    16. Irvine, F. Owen & Schuh, Scott, 2007. "Interest sensitivity and volatility reductions: Cross-section evidence," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 31-42, July.
    17. Irvine, F. Owen, 2007. "Sales persistence and the reduction in GDP volatility," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 22-30, July.
    18. Alejandro Justiniano & Giorgio E. Primiceri, 2008. "The Time-Varying Volatility of Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 98(3), pages 604-641, June.
    19. Koch, Christoffer, 2015. "Deposit interest rate ceilings as credit supply shifters: Bank level evidence on the effects of Regulation Q," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 316-326.
    20. Ćorić, Bruno & Pugh, Geoff, 2013. "Foreign direct investment and output growth volatility: A worldwide analysis," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 260-271.

    More about this item

    Keywords

    Business Cycle; Volatility; Germany;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:1129. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.