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Germany and the European Business Cycle - An Analysis of Causal Relations in an International Real Business Cycle Model

  • Ferdinand Fichtner

    ()

This paper studies the role of the German economy for the existence of the so called European business cycle, a term referring to the regularly observed synchronization of the national business cycles in Europe. Using a three-country general equilibrium model, we are able to simulate impulse response functions mimicking the important features observed in the data. Focusing on the importance of shocks affecting the German GDP we show that trade-related transmission from Germany to the other European economies is only of minor importance for the synchronization of national business cycles. On the contrary, our findings suggest that the influence of common shocks and of technology spillovers accounts for most of the parallels in economic performance.

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File URL: http://www.iwp.uni-koeln.de/DE/Publikationen/dp/dp01_03.pdf
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Paper provided by Institute for Economic Policy, Cologne, Germany in its series IWP Discussion Paper Series with number 01/2003.

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Length: 24 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:kln:iwpdip:dp01/03
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  1. Finn E. Kydland & Edward C. Prescott, 1994. "The computational experiment: an econometric tool," Working Paper 9420, Federal Reserve Bank of Cleveland.
  2. Mike Artis & Hans-Martin Krolzig & Juan Toro, 2004. "The European business cycle," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 1-44, January.
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  4. Robin L. Lumsdaine & Eswar S. Prasad, 1997. "Identifying the Common Component in International Economic Fluctuations," NBER Working Papers 5984, National Bureau of Economic Research, Inc.
  5. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  6. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
  7. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007 Elsevier.
  8. Anderson, H.M. & Kwark, N.-S. & Vahid, F., 1999. "Does International Trade Synchronize Business Cycles?," Monash Econometrics and Business Statistics Working Papers 8/99, Monash University, Department of Econometrics and Business Statistics.
  9. Marianne Baxter & Mario J. Crucini, 1992. "Business cycles and the asset structure of foreign trade," Discussion Paper / Institute for Empirical Macroeconomics 59, Federal Reserve Bank of Minneapolis.
  10. Allan W. Gregory & Allen C. Head & Jacques Raynauld, 1994. "Measuring World Business Cycles," Working Papers 902, Queen's University, Department of Economics.
  11. Baxter, M. & Crucini, M.J., 1990. "Explaining Saving/Investment Correlation," RCER Working Papers 224, University of Rochester - Center for Economic Research (RCER).
  12. Nelson, Charles R & Kang, Heejoon, 1981. "Spurious Periodicity in Inappropriately Detrended Time Series," Econometrica, Econometric Society, vol. 49(3), pages 741-51, May.
  13. Douglas Laxton & Eswar Prasad, 2000. "International Spillovers of Macroeconomic Shocks; A Quantitative Exploration," IMF Working Papers 00/101, International Monetary Fund.
  14. David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
  15. Canova, Fabio & Marrinan, Jane, 1998. "Sources and propagation of international output cycles: Common shocks or transmission?," Journal of International Economics, Elsevier, vol. 46(1), pages 133-166, October.
  16. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
  17. Dellas, Harris, 1986. "A real model of the world business cycle," Journal of International Money and Finance, Elsevier, vol. 5(3), pages 381-394, September.
  18. Robert Inklaar & Jakob de Haan, 2000. "Is there Really a European Business Cycle?," CESifo Working Paper Series 268, CESifo Group Munich.
  19. Gary D. Hansen & Edward C. Prescott, 1992. "Recursive methods for computing equilibria of business cycle models," Discussion Paper / Institute for Empirical Macroeconomics 36, Federal Reserve Bank of Minneapolis.
  20. Artis, Michael J & Zhang, Wenda, 1995. "International Business Cycles and the ERM: Is there a European Business Cycle?," CEPR Discussion Papers 1191, C.E.P.R. Discussion Papers.
  21. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-75, August.
  22. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1, December.
  23. Mills, Terence C & Holmes, Mark J, 1999. "Common Trends and Cycles in European Industrial Production: Exchange Rate Regimes and Economic Convergence," Manchester School, University of Manchester, vol. 67(4), pages 557-87, September.
  24. 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.
  25. J. E. Stiglitz, 1999. "Introduction," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 249-254, November.
  26. Cantor, Richard & Mark, Nelson C, 1988. "The International Transmission of Real Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 493-507, August.
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