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

What caused the early millennium slowdown? Evidence based on vector autoregressions

  • Gert Peersman

This paper uses a number of simple VAR models for the industrialised world, the United States and the euro area respectively to analyse the underlying shocks that may have caused the recent slowdown. The results of two identification strategies are compared. One is based on traditional zero restrictions and, as an alternative, an identification scheme based on more recent sign restrictions is proposed. The main conclusion is that the recent slowdown was caused by a combination of several shocks: a negative aggregate supply and aggregate spending shock, the increase of oil prices in 1999, and restrictive monetary policy in 2000. These shocks were more pronounced in the United States than the euro area. The results are somewhat different depending on the identification strategy. It is illustrated that traditional zero restrictions can have an influence on the estimated impact of certain shocks.

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.bankofengland.co.uk/research/Documents/workingpapers/2005/WP272.pdf
Download Restriction: no

Paper provided by Bank of England in its series Bank of England working papers with number 272.

as
in new window

Length:
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:boe:boeewp:272
Contact details of provider: Postal:
Bank of England, Threadneedle Street, London, EC2R 8AH

Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
Email:


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. Fabio Canova & Gianni de Nicoló, 1999. "On the sources of business cycles in the G-7," Economics Working Papers 459, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2000.
  2. Gerlach, Stefan & Smets, Frank, 1995. "The Monetary Transmission Mechanism: Evidence from the G-7 Countries," CEPR Discussion Papers 1219, C.E.P.R. Discussion Papers.
  3. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
  4. Christopher A. Sims & Tao Zha, 1995. "Error bands for impulse responses," FRB Atlanta Working Paper 95-6, Federal Reserve Bank of Atlanta.
  5. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  6. Uhlig, H.F.H.V.S., 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," Discussion Paper 1999-28, Tilburg University, Center for Economic Research.
  7. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
  8. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," NBER Working Papers 2589, National Bureau of Economic Research, Inc.
  9. Faust, Jon, 1998. "The robustness of identified VAR conclusions about money," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 49(1), pages 207-244, December.
  10. Vincent Labhard, 2003. "What caused the 2000/01 slowdown? Results from a VAR analysis of G7 GDP components," Bank of England working papers 190, Bank of England.
  11. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," FRB Atlanta Working Paper 94-2, Federal Reserve Bank of Atlanta.
  12. Jordi Galí, 1992. "How Well Does The IS-LM Model Fit Postwar U. S. Data?," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 709-738.
  13. Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
  14. Canova, Fabio & Pina, Joaquim Pivis, 1999. "Monetary Policy Misspecification in VAR Models," CEPR Discussion Papers 2333, C.E.P.R. Discussion Papers.
  15. Mads Kieler & Tuomas Saarenheimo, 1998. "Differences in monetary policy transmission? A case not closed," European Economy - Economic Papers 2008 - 2015 132, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  16. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
  17. Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
  18. Daniel F. Waggoner & Tao Zha, 1997. "Normalization, probability distribution, and impulse responses," FRB Atlanta Working Paper 97-11, Federal Reserve Bank of Atlanta.
  19. Fabio Canova & Gianni De Nicolo, 2000. "Monetary disturbances matter for business fluctuations in the G-7," International Finance Discussion Papers 660, Board of Governors of the Federal Reserve System (U.S.).
  20. Jon Faust, 1998. "The robustness of identified VAR conclusions about money," International Finance Discussion Papers 610, Board of Governors of the Federal Reserve System (U.S.).
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. What caused the early millennium slowdown? Evidence based on vector autoregressions (JAE 2005) in ReplicationWiki

When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:272. 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: (Digital Media Team)

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.