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Have Swedish Postwar Business Cycles Been Generated Abroad or at Home?


  • Lindé, Jesper

    () (Dept. of Economics, Stockholm School of Economics)


This paper investigates the relative importance of foreign and domestic shocks for the Swedish postwar business cycle in a neoclassical stochastic growth model of a small open economy. We extend previous work in the literature by allowing for stochastic fiscal policy, since recent research has shown that fiscal policy shocks may be important for business cycles. It is found that the introduction of fiscal policy improves the empirical fit of the model, but not significantly so. Foreign and domestic shocks are shown to be approximately equally important for fluctuations in output, while foreign shocks are farmost important for fluctuations in the real exchange rate and the current account. Among the domestic shocks, innovations in fiscal policy are found to be of relatively low importance for business cycles.

Suggested Citation

  • Lindé, Jesper, 1998. "Have Swedish Postwar Business Cycles Been Generated Abroad or at Home?," SSE/EFI Working Paper Series in Economics and Finance 282, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0282

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    References listed on IDEAS

    1. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
    2. Young H. P., 1993. "An Evolutionary Model of Bargaining," Journal of Economic Theory, Elsevier, vol. 59(1), pages 145-168, February.
    3. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    4. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    5. Tore Ellingsen, 1997. "The Evolution of Bargaining Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 581-602.
    6. Stahl Dale O., 1993. "Evolution of Smartn Players," Games and Economic Behavior, Elsevier, vol. 5(4), pages 604-617, October.
    7. Hurkens Sjaak, 1995. "Learning by Forgetful Players," Games and Economic Behavior, Elsevier, vol. 11(2), pages 304-329, November.
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    Cited by:

    1. Martin Floden & Jesper Lindé, 2001. "Idiosyncratic Risk in the United States and Sweden: Is There a Role for Government Insurance?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 406-437, July.

    More about this item


    Real Business Cycle model; small open economy; Simulated Method of Moments; variance decomposition.;

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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