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Determinants of business cycles in small scale macroeconomic models: the German case

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  • Alfred Maussner
  • Julius Spatz

Abstract

We identify measures of shocks to total factor productivity and preferences from two real business cycle models and subject them to Granger causality tests to see whether they can be considered exogenous to other plausible sources of the German business cycle. For the period 60.i to 89.iv no variable Granger causes the shock measures, and for the period 70.i to 01.iv, only M3 does. We attribute the latter result to the breaks in our time series associated with the German reunification in 1990 and the European Monetary Union in 1999. We, thus, find no evidence to reject the exogeneity of our shock measures. Our findings contrast with similar studies for other countries that question the exogeneity of either productivity or preference shocks.
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  • Alfred Maussner & Julius Spatz, 2006. "Determinants of business cycles in small scale macroeconomic models: the German case," Empirical Economics, Springer, vol. 31(4), pages 921-950, November.
    • Handle: RePEc:spr:empeco:v:31:y:2006:i:4:p:921-950
    DOI: 10.1007/s00181-006-0062-9
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    References listed on IDEAS

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    1. Evans, Charles L., 1992. "Productivity shocks and real business cycles," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 191-208, April.
    2. Holland, Allison & Scott, Andrew, 1998. "The Determinants of UK Business Cycles," Economic Journal, Royal Economic Society, vol. 108(449), pages 1067-1092, July.
    3. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-273, April.
    4. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
    5. Rotemberg, Julio J & Woodford, Michael, 1992. "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1153-1207, December.
    6. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
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    Cited by:

    1. Schmidt, Torsten & Zimmermann, Tobias, 2005. "Effects of Oil Price Shocks on German Business Cycles," RWI Discussion Papers 31, RWI - Leibniz-Institut für Wirtschaftsforschung.
    2. repec:zbw:rwidps:0031 is not listed on IDEAS
    3. Torsten Schmidt & Tobias Zimmermann, 2005. "Effects of Oil Price Shocks on German Business Cycles," RWI Discussion Papers 0036, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.

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    More about this item

    Keywords

    Real business cycles; Solow residual; Granger causality; E32; O47;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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