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Macroeconomic Effects of Sectoral Shocks in Germany, The U.K. and, The U.S. A VAR-GARCH-M Approach

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  • Gianluigi Pelloni
  • Wolfgang Polasek

Abstract

A VAR-GARCH-M model for aggregate employment and employment shares isdeveloped to explore the macroeconomic effects of sectoral shocks. Using U.S.,U.K. and German data, three main issues are investigated: the relevance ofshocks volatility; the amount of aggregate employment growth variationaccounted for by re-allocation shocks and the amount of aggregate innovation volatility explained by sectoral components. Bayesian methods are used for estimation model selection and innovation accounting – Bayes factors for model selection and MCMC for estimation. The results favor the VAR-GARCH-M model. A significant GARCH-M component indicates the presence of volatility clustering and the feedback of volatilities on aggregate employment and sectoral shares growth rates. The innovation analysis supports sectoral shocks as a triggering force for aggregate employment fluctuations. In all three countries, 45% to 55% ofaggregate employment variation is accounted for by sectoral innovations. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Gianluigi Pelloni & Wolfgang Polasek, 2003. "Macroeconomic Effects of Sectoral Shocks in Germany, The U.K. and, The U.S. A VAR-GARCH-M Approach," Computational Economics, Springer;Society for Computational Economics, vol. 21(1), pages 65-85, February.
  • Handle: RePEc:kap:compec:v:21:y:2003:i:1:p:65-85
    DOI: 10.1023/A:1022238914245
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    Cited by:

    1. Theodore Panagiotidis & Gianluigi Pelloni, 2014. "Asymmetry and Lilien’s Sectoral Shifts Hypothesis: A Quantile Regression Approach," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 6(1), pages 68-86, June.
    2. Theodore Panagiotidis & Gianluigi Pelloni, 2013. "Employment Reallocation and Unemployment Revisited: A Quantile Regression Approach," Working Paper series 01_13, Rimini Centre for Economic Analysis, revised Feb 2014.
    3. Giovanni Gallipoli & Gianluigi Pelloni, 2013. "Macroeconomic Effects of Job Reallocations: A Survey," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 5(2), pages 127-176, December.
    4. James D. Hamilton, 2008. "Macroeconomics and ARCH," NBER Working Papers 14151, National Bureau of Economic Research, Inc.
    5. Reicher, Christopher Phillip, 2011. "A tale of two countries: A comparison of the aggregate effects of sectoral reallocation in the United States and Germany," Kiel Working Papers 1721, Kiel Institute for the World Economy (IfW).
    6. repec:bla:ecinqu:v:55:y:2017:i:1:p:501-526 is not listed on IDEAS
    7. Dimitrios Bakas & Theodore Panagiotidis & Gianluigi Pelloni, 2017. "Regional And Sectoral Evidence Of The Macroeconomic Effects Of Labor Reallocation: A Panel Data Analysis," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 501-526, January.
    8. Acconcia, Antonio & Simonelli, Saverio, 2008. "Interpreting aggregate fluctuations looking at sectors," Journal of Economic Dynamics and Control, Elsevier, vol. 32(9), pages 3009-3031, September.

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