Short run comovement, persistent shocks and the business cycle
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Authors
Following standard real business cycle theory, long run economic growth and short run business cycle fluctuations are attributed to a series of productivity shocks propagated by the economic system which is assumed to be in a rational expectations equilibrium. Characterizing the technical progress as the common stochastic trend we are able to investigate the short and long run effects of the productivity shocks using a cointegrated system. From the empirical analysis it emerges that the long run relationship between the system variables can be traced back to a single permanent component which is interpreted as a measure of technological progress. The short run dynamic impact of the permanent innovations is investigated using the empirical impulse response functions. It turns out that the permanent shocks are able to explain a substantial portion of business cycle fluctuations.
| Translated title of the contribution | Eine empirische Analyse der Wirkung kurz- und langfristiger Schocks im Konjunkturzyklus |
|---|---|
| Original language | English |
| Journal | Jahrbücher für Nationalökonomie und Statistik |
| Volume | 217 |
| Issue number | 4 |
| Pages (from-to) | 436-448 |
| Number of pages | 13 |
| ISSN | 0021-4027 |
| DOIs | |
| Publication status | Published - 01.08.1998 |
| Externally published | Yes |
Bibliographical note
This version of the paper benefits from a number of helpful suggestions of
Olaf Hübler, Mark Watson, Jürgen Wolters and the seminar participants of the Free University of Berlin, the University of Limburg, Maastricht and the C.O.R.E, Louvain-La-Neuve. Moreover, the helpful comments and suggestions of an anonymous referee are gratefully acknowledged. All remaining errors are of course our own.
- Economics, empirical/statistics - Business cycles, vector autoregression, cointegration, common trends, impulse responses