IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Trends and Cycles : an Historical Review of the Euro Area

  • Barthélemy, J.
  • Marx, M.
  • Poissonnier, A.

We analyze the euro area business cycle in a medium scale DSGE model where we assume two stochastic trends: one on total factor productivity and one on the inflation target of the central bank. To justify our choice of integrated trends, we test alternative specifications for both of them. We do so, estimating trends together with the model's structural parameters, to prevent estimation biases. In our estimates, business cycle fluctuations are dominated by investment specific shocks and preference shocks of households. Our results cast doubts on the view that cost push shocks dominate economic fluctuations in DSGE models and show that productivity shocks drive fluctuations on a longer term. As a conclusion, we present our estimation's historical reading of the business cycle in the euro area. This estimation gives credible explanations of major economic events since 1985.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.banque-france.fr/uploads/tx_bdfdocumentstravail/DT258.pdf
Download Restriction: no

Paper provided by Banque de France in its series Working papers with number 258.

as
in new window

Length: 39 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:bfr:banfra:258
Contact details of provider: Postal:
Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Raf Wouters & Frank Smets, 2005. "Comparing shocks and frictions in US and euro area business cycles: a Bayesian DSGE Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 161-183.
  2. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research 35, National Bank of Belgium.
  3. Christopher J. Erceg & Dale W. Henderson & Andrew T. Levin, 1999. "Optimal monetary policy with staggered wage and price contracts," International Finance Discussion Papers 640, Board of Governors of the Federal Reserve System (U.S.).
  4. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1998. "The Role of Investment-Specific Technological Change in the Business Cycle," RCER Working Papers 449, University of Rochester - Center for Economic Research (RCER).
  5. Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2011. "Investment Shocks and the Relative Price of Investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 101-121, January.
  6. Del Negro, Marco & Schorfheide, Frank, 2008. "Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1191-1208, October.
  7. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  9. Canova, Fabio, 1999. "Does Detrending Matter for the Determination of the Reference Cycle and the Selection of Turning Points?," Economic Journal, Royal Economic Society, vol. 109(452), pages 126-50, January.
  10. Gorodnichenko, Yuriy & Ng, Serena, 2010. "Estimation of DSGE models when the data are persistent," Journal of Monetary Economics, Elsevier, vol. 57(3), pages 325-340, April.
  11. Gerlach, Stefan & Schnabel, Gert, 1999. "The Taylor Rule and Interest Rates in the EMU Area," CEPR Discussion Papers 2271, C.E.P.R. Discussion Papers.
  12. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  13. Fagan, Gabriel & Henry, Jerome & Mestre, Ricardo, 2005. "An area-wide model for the euro area," Economic Modelling, Elsevier, vol. 22(1), pages 39-59, January.
  14. Smets, Frank & Wouters, Raf, 2007. "Shocks and frictions in US business cycles: a Bayesian DSGE approach," Working Paper Series 0722, European Central Bank.
  15. Ellen R. McGrattan & Patrick J. Kehoe & V. V. Chari, 2008. "New Keynesian models: not yet useful for policy analysis," Working Papers 664, Federal Reserve Bank of Minneapolis.
  16. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May.
  17. Timothy Cogley & James M. Nason, 1993. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series: implications for business cycle research," Working Papers in Applied Economic Theory 93-01, Federal Reserve Bank of San Francisco.
  18. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad T., 2007. "Euler equations and money market interest rates: A challenge for monetary policy models," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1863-1881, October.
  19. Ferroni Filippo, 2011. "Trend Agnostic One-Step Estimation of DSGE Models," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-36, July.
  20. Timothy Cogley & Argia M. Sbordone, 2008. "Trend Inflation, Indexation, and Inflation Persistence in the New Keynesian Phillips Curve," American Economic Review, American Economic Association, vol. 98(5), pages 2101-26, December.
  21. Smets, F. & Sahuc, J-G., 2007. "Differences in Interest Rate Policy at the ECB and the Fed: An Investigation with a Medium-Scale DSGE Model," Working papers 182, Banque de France.
  22. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  23. Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 533-540, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:258. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael brassart)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.