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The Determinants of UK Business Cycles

  • Holland, Allison
  • Scott, Andrew

This paper considers the causes of postwar U.K. business cycles. Using an extended stochastic growth model the authors construct estimates of productivity and preference shocks both of which are highly persistent, volatile and potentially capable of explaining U.K. business cycles. They find the productivity term is the dominant explanation of U.K. output fluctuations but their estimated preference shift is crucial in understanding employment movements. A variety of Granger causality tests establish whether these productivity and preference terms are unpredictable and so can be potentially considered as the cause of U.K. business cycles or whether they are themselves Granger caused by other variables.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 108 (1998)
Issue (Month): 449 (July)
Pages: 1067-92

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Handle: RePEc:ecj:econjl:v:108:y:1998:i:449:p:1067-92
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