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Stock markets and business cycle comovement in Germany before World War I: Evidence from spectral analysis

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  • Uebele, Martin
  • Ritschl, Albrecht

Abstract

Historical national account data are often plagued by quality problems, and rivaling series imply different business cycle chronologies. This problem is particularly grave for Germany before World War I [Burhop, C., Wolff, G.B., 2005. A compromise estimate of net national product and the business cycle in Germany 1851-1913. Journal of Economic History 65(3), 615-657]. We exploit the comovement between asset prices and various GNP estimates under the efficient market hypothesis to obtain an improved business cycle dating, and to decide between the various alternative national accounts series. We also examine the comovement between financial markets and various disaggregate indicators of real investment. Employing both time and frequency domain techniques, we find impressive comovement between the stock market, an estimate of the aggregate wage bill, and disaggregate evidence on real investment. Our findings confirm traditional business cycle chronologies for Germany and lead us to discard later, revisionist attempts to date the business cycle.

Suggested Citation

  • Uebele, Martin & Ritschl, Albrecht, 2009. "Stock markets and business cycle comovement in Germany before World War I: Evidence from spectral analysis," Journal of Macroeconomics, Elsevier, vol. 31(1), pages 35-57, March.
  • Handle: RePEc:eee:jmacro:v:31:y:2009:i:1:p:35-57
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    Cited by:

    1. Allen, William A. & Moessner, Richhild, 2012. "The international propagation of the financial crisis of 2008 and a comparison with 1931," Financial History Review, Cambridge University Press, vol. 19(02), pages 123-147, August.
    2. Rania Jammazi & Chaker Aloui, 2014. "Cyclical components and dual long memory in the foreign exchange rate dynamics: the Tunisian case," Working Papers 2014-198, Department of Research, Ipag Business School.
    3. repec:psc:journl:v:9:y:2017:i:3:p:201-241 is not listed on IDEAS
    4. Sarferaz, Samad & Uebele, Martin, 2009. "Tracking down the business cycle: A dynamic factor model for Germany 1820-1913," Explorations in Economic History, Elsevier, vol. 46(3), pages 368-387, July.
    5. Thomas C. Owen, 2013. "Measuring business cycles in the Russian Empire," Economic History Review, Economic History Society, vol. 66(3), pages 895-916, August.
    6. Tang, Ling & Yu, Lean & He, Kaijian, 2014. "A novel data-characteristic-driven modeling methodology for nuclear energy consumption forecasting," Applied Energy, Elsevier, vol. 128(C), pages 1-14.
    7. Lukasz Lenart, 2015. "Discrete Spectral Analysis. The Case of Industrial Production in Selected European Countries," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 15, pages 27-47.
    8. Reijnders, Jan P.G., 2009. "Trend movements and inverted Kondratieff waves in the Dutch economy, 1800-1913," Structural Change and Economic Dynamics, Elsevier, vol. 20(2), pages 90-113, June.

    More about this item

    Keywords

    Business cycle chronology Imperial Germany Spectral analysis Efficient market hypothesis;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913

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