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Nonlinear Impacts of International Business Cycles on the U.K. -- A Bayesian Smooth Transition VAR Approach

Author

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  • Gefang Deborah

    (Lancaster University)

  • Strachan Rodney

    (University of Queensland and Rimini Centre for Economic Analysis)

Abstract

Employing a Bayesian approach, we investigate the impact of international business cycles on the U.K. economy in the context of a smooth transition VAR. We find that the British business cycle is asymmetrically influenced by growth in the U.S., France and Germany. Overall, positive and negative shocks generating in the U.S. or France affect the U.K. in the same directions as the shock. However, a shock emanating from Germany, whether positive or negative, always exerts negative cumulative effects on the U.K. Further, a positive shock arising from Germany adversely affects the U.K. output growth more than a negative shock of the same size.

Suggested Citation

  • Gefang Deborah & Strachan Rodney, 2009. "Nonlinear Impacts of International Business Cycles on the U.K. -- A Bayesian Smooth Transition VAR Approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 14(1), pages 1-33, December.
    • Handle: RePEc:bpj:sndecm:v:14:y:2009:i:1:n:2
    DOI: 10.2202/1558-3708.1677
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    3. Kirstin Hubrich & Timo Teräsvirta, 2013. "Thresholds and Smooth Transitions in Vector Autoregressive Models," CREATES Research Papers 2013-18, Department of Economics and Business Economics, Aarhus University.
    4. Nguyen, Bao H. & Okimoto, Tatsuyoshi & Tran, Trung Duc, 2022. "Uncertainty-dependent and sign-dependent effects of oil market shocks," Journal of Commodity Markets, Elsevier, vol. 26(C).
    5. Joshua C. C. Chan, 2018. "Specification tests for time-varying parameter models with stochastic volatility," Econometric Reviews, Taylor & Francis Journals, vol. 37(8), pages 807-823, September.
    6. Ringwald, Leopold & Zörner, Thomas O., 2023. "The money-inflation nexus revisited," Journal of Empirical Finance, Elsevier, vol. 73(C), pages 293-333.
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    8. Hauzenberger, Niko & Pfarrhofer, Michael & Stelzer, Anna, 2021. "On the effectiveness of the European Central Bank’s conventional and unconventional policies under uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 822-845.

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