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External fluctuations in the Spanish economy after its European integration: The size of the shock or the propagation effects?
Abstract
The aim of this paper is to analyse whether the impact of European shocks in the Spanish economy has increased after the entry of Spain into the European Community. Using VAR models, we try to disentangle if the changes observed are due to a change in the size of the shocks or in the propagation effects. The results shows that after 1986, despite the decrease in the size of European shocks, their impact on the Spanish business cycle has increased due to the greater sensitivity of the Spanish economy to these shocks.
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We hope to answer three questions: Has there been a structural break in postwar U.S. real GDP growth towards stabilization? If so, when? What is the nature of this structural break? We employ a Bayesian approach to identify a structural break at an unknown changepoint in a Markov-switching model of the business cycle. Empirical results suggest a break in GDP growth toward stabilization, with the posterior mode of the break date at 1984:1. Furthermore, we find a narrowing gap between growth rates during recessions and booms that is at least as important as any decline in the volatility of shocks. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
A country's suitability for entry into a currency union depends on a number of economic conditions. These include, inter alia, the intensity of trade with other potential members of the currency union, and the extent to which domestic business cycles are correlated with those of the other countries. But international trade patterns and international business cycle correlations are endogenous. This paper develops and investigates the relationship between the two phenomena. Using thirty years of data for twenty industrialized countries, the authors uncover a strong and striking empirical finding: countries with closer trade links tend to have more tightly correlated business cycles.
Successful fixed exchange rate regimes impose policy disciplines that are likely to lead to conformity in the business cycles of the participating countries. This conjecture is borne out in the present paper by the evidence that the business cycle affiliation of ERM member countries has shifted from the United States to Germany since the formation of the ERM. This effect is bolstered by growing links in trade and finance between the European countries. The United Kingdom is conspicuous among these in that its business cycle affiliation did not change in the period of study.
This paper presents a summary of recent work on a new methodology to test for the presence of a unit root in univariate time series models. The stochastic framework is quite general. While the Dickey-Fuller approach accounts for the autocorrelation of the first-differences of a series in a parametric fashion by estimating additional nuisance parameters, this new approach deals with this phenomenon in a nonparametric way. We apply these new tests to reassess recent findings on the behavior of common macroeconomic time series, including the various series studied by Nelson and Plosser (1982).
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The degree of symmetry of the shocks that cause macroeconomic fluctuations in the different European economies is a basic consideration when evaluating the cost in terms of loss of the nominal exchange rate as an instrument for short-term macroeconomic adjustment. The more symmetrical these shocks, the lower the costs. This paper uses a structural Bayesian Vector Autoregressive (BVAR) approach and quarterly data from 1970 to 1996 to characterise the responses to common and specific, nominal and real, shocks in four European economies. Our findings suggest that, in the short run, asymmetrical shocks have dominated.
We propose a test of the null hypothesis that an observable series is stationary around a deterministic trend. The series is expressed as the sum of deterministic trend, random walk, and stationary error, and the test is the LM test of the hypothesis that the random walk has zero variance. The asymptotic distribution of the statistic is derived under the null and under the alternative that the series is difference-stationary. Finite sample size and power are considered in a Monte Carlo experiment. The test is applied to the Nelson-Plosser data, and for many of these series the hypothesis of trend stationarity cannot be rejected.
Band-pass filters are useful in a wide range of economic contexts. This paper develops a set of approximate band-pass filters and illustrates their application to measuring the business-cycle component of macroeconomic activity. Detailed comparisons are made with several alternative filters commonly used for extracting business-cycle components. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
Successful exchange rate regimes impose policy disciplines that are likely to lead to conformity in the business cycles of the participating countries. This conjecture is borne out in the paper by the evidence in it that the business cycle affiliation of Exchange Rate Mechanism (ERM) member countries has shifted from the United States to Germany since the formation of the ERM. This effect is bolstered by the growing links in trade between the EU countries. The United Kingdom is conspicuous among the latter in that its business cycle affiliation did not change in the period covered by the study. Copyright 1999 by Royal Economic Society.
We propose a procedure for representing a time series as the sum of a smoothly varying trend component and a cyclical component. We document the nature of the co-movements of the cyclical components of a variety of macroeconomic time series. We find that these co-movements are very different than the corresponding co-movements of the slowly varying trend components.
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Building on Koop, [Koop et al. (1996) Impulse response analysis in nonlinear multivariate models. Journal of Econometrics 74, 119–147] we propose the `generalized' impulse response analysis for unrestricted vector autoregressive (VAR) and cointegrated VAR models. Unlike the traditional impulse response analysis, our approach does not require orthogonalization of shocks and is invariant to the ordering of the variables in the VAR. The approach is also used in the construction of order-invariant forecast error variance decompositions.
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