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Are Economic Fluctuations Really Persistent? A Reinterpretation of Some International Evidence

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  • Demery, D
  • Duck, N W

Abstract

In this paper, the authors show that estimates of J. H. Cochrane's (1988) suggested measure of the persistence of fluctuations in real output will be biased if there is a single break in the mean rate of growth of output. The authors then show that the major findings of J. Y. Campbell and N. G. Mankiw (1989)--that for a number of industrial countries estimates of Cochrane's measure of persistence are generally very high though different and that a subgroup of countries with high output persistence have low relative output persistence--can be largely accounted for by the difference in each country between its pre-1974 and post-1973 mean growth rates. Copyright 1992 by Royal Economic Society.

Suggested Citation

  • Demery, D & Duck, N W, 1992. "Are Economic Fluctuations Really Persistent? A Reinterpretation of Some International Evidence," Economic Journal, Royal Economic Society, vol. 102(414), pages 1094-1101, September.
  • Handle: RePEc:ecj:econjl:v:102:y:1992:i:414:p:1094-101
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    1. Saint-Paul, G. & Bentolila, S., 2000. "Will EMU Increase Eurosclerosis?," Papers 0004, Centro de Estudios Monetarios Y Financieros-.
    2. Artis, Michael & Ehrmann, Michael, 2006. "The exchange rate - A shock-absorber or source of shocks? A study of four open economies," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 874-893, October.
    3. David D. VanHoose & Christopher J. Waller, 1989. "Discretion, wage indexation, and inflation," Research Working Paper 89-03, Federal Reserve Bank of Kansas City.
    4. Maurice Obstfeld, 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," NBER Working Papers 8369, National Bureau of Economic Research, Inc.
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    6. Holden, Steinar, 1997. "Wage Bargaining, Holdout, and Inflation," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 235-255, April.
    7. Fabrizio Coricelli & Alex Cukierman & Alberto Dalmazzo, 2006. "Monetary Institutions, Monopolistic Competition, Unionized Labor Markets and Economic Performance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 39-63, March.
    8. Sibert, Anne & Sutherland, Alan, 2000. "Monetary union and labor market reform," Journal of International Economics, Elsevier, vol. 51(2), pages 421-435, August.
    9. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
    10. Gottfries, Nils, 1992. "Insiders, Outsiders, and Nominal Wage Contracts," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 252-270, April.
    11. Bryson, Jay H & Chen, Chih-huan & VanHoose, David D, 1998. " Implications of Economic Interdependence for Endogenous Wage Indexation Decisions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(4), pages 693-710, December.
    12. Christopher J. Waller & David D. VanHoose, 1992. "Discretionary Monetary Policy and Socially Efficient Wage Indexation," The Quarterly Journal of Economics, Oxford University Press, pages 1451-1460.
    13. Alun H. Thomas, 1997. "Is the Exchange Rate a Shock Absorber? the Case of Sweden," IMF Working Papers 97/176, International Monetary Fund.
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    Cited by:

    1. Christian Ragacs & Thomas Steinberger & Martin Zagler, 1998. "Growth Theories and the Persistence of Output Fluctuations: The Case of Austria," Department of Economics Working Papers wuwp060, Vienna University of Economics and Business, Department of Economics.
    2. repec:sbe:breart:v:23:y:2003:i:2:a:2725 is not listed on IDEAS
    3. McMillan, David G. & Wohar, Mark E., 2010. "Persistence and time-varying coefficients," Economics Letters, Elsevier, vol. 108(1), pages 85-88, July.
    4. Nagakura, Daisuke, 2008. "A note on the two assumptions of standard unobserved components models," Economics Letters, Elsevier, vol. 100(1), pages 123-125, July.
    5. Gil-Alana, L. A. & Robinson, P. M., 1997. "Testing of unit root and other nonstationary hypotheses in macroeconomic time series," Journal of Econometrics, Elsevier, vol. 80(2), pages 241-268, October.
    6. Gil-Alaña, Luis A., 2000. "Testing of unit roots and other fractionally integrated hypotheses in the presence of structural breaks," SFB 373 Discussion Papers 2000,13, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    7. Gil-Alaña, Luis A., 2001. "Unit and fractional roots in the presence of abrupt changes with an application to the Brazilian inflation rate," SFB 373 Discussion Papers 2001,67, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.

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