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How do Individual Sectors Respond to Macroeconomic Shocks? A Structural Dynamic Factor Approach Applied to Swiss Data

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  • Gregor Bäurle
  • Elizabeth Steiner

Abstract

This paper quantifies the impact of monetary policy, exchange rates and external demand on the production sectors of the Swiss economy. As the model covers the full set of production sectors it is possible through aggregation to estimate the impact of a given shock on total GDP. We conduct the analysis in the framework of a Bayesian structural dynamic factor model. Our approach proves to be useful to cope with the large data set and at the same time allows us to consistently identify fundamental aggregate shocks. We find that monetary variables, such as interest rates and exchange rates, mainly influence the financial sectors. Variations in value added in the manufacturing sectors or business services, on the other hand, are markedly influenced by changes in external demand, but show a weaker and slower reaction to monetary variables.

Suggested Citation

  • Gregor Bäurle & Elizabeth Steiner, 2015. "How do Individual Sectors Respond to Macroeconomic Shocks? A Structural Dynamic Factor Approach Applied to Swiss Data," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 151(III), pages 167-225, September.
  • Handle: RePEc:ses:arsjes:2015-iii-1
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    References listed on IDEAS

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    Cited by:

    1. Christian Hepenstrick & Jason Blunier, 2022. "What were they thinking? Estimating the quarterly forecasts underlying annual growth projections," Working Papers 2022-05, Swiss National Bank.
    2. Buchholz, Manuel & von Schweinitz, Gregor & Tonzer, Lena, 2018. "Did the Swiss exchange rate shock shock the market?," IWH Discussion Papers 9/2018, Halle Institute for Economic Research (IWH).
    3. Gregor Bäurle & Rolf Scheufele, 2019. "Credit cycles and real activity: the Swiss case," Empirical Economics, Springer, vol. 56(6), pages 1939-1966, June.
    4. Gregor Bäurle & Elizabeth Steiner & Gabriel Züllig, 2021. "Forecasting the production side of GDP," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(3), pages 458-480, April.
    5. Bäurle, Gregor & Lein, Sarah M. & Steiner, Elizabeth, 2021. "Employment adjustment and financial tightness – Evidence from firm-level data," Journal of International Money and Finance, Elsevier, vol. 115(C).
    6. Gregor Bäurle & Matthias Gubler & Diego R. Känzig, 2021. "International Inflation Spillovers: The Role of Different Shocks," International Journal of Central Banking, International Journal of Central Banking, vol. 17(1), pages 191-230, March.

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    More about this item

    Keywords

    sectoral value added; dynamic factor model; sign restrictions;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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