target zones and interest rate variability abstract for narrow exchange rate bands and for reasonable parameter values the interest rate differential s asymptotic unconditional variability is increasing in the width of the exchange rate band whereas for wide exchange rate bands it is slowly decreasing in the exchange rate band the interest rate differential s instantaneous conditional variability is decreasing in the width of the exchange rate band a narrow target zone differs from a completely fixed exchange rate regime in that the interest rate differential s instantaneous standard deviation is high and even increases when the zone narrows

the futile quest for a grand explanation of long run government expenditure this paper carries out a critical reappraisal of the two contending theories purporting to explain long run government spending wagner s law and different variants of the ratchet effect we analyze data spanning from the early 19 th century until the present day in sweden and the united kingdom hence in contrast to previous studies we evaluate the validity of wagner s law and the ratchet effect hypothesis over a very long time period starting at the beginning of industrialization cointegration analysis is used to investigate the long run relationships between government expenditure and gdp focusing on sub periods and structural breaks moreover we test the ratchet effect hypothesis by estimating models which allow for asymmetric adjustment according to our main results wagner s law does not hold in the long run although the data are consistent with wagner s law between roughly 1860 and the mid 1970s this can be traced to the formation of the modern public sector including the introduction of public education health care and so forth yet wagner s law did not hold during the initial industrialization phase before 1860 and in recent periods gdp only affects the government spending share when we control for population age structure finally we find some evidence of asymmetric adjustment in the uk particularly in the post wwii period however the ratchet effect is not a general cause of the growth of government spending

long term growth and short term economic instability when learning by doing is at the origin of growth the long run growth rate should be negatively related to the amplitude of the business cycle if human capital accumulation is increasing and concave in the cyclical component of production empirical evidence strongly supports this nding for industrialized countries and european regions using the standard control variables we nd that countries and regions that have a higher standard deviation of growth and of unemployment have lower growth rates the result does not come from an e ect of instability on investment the negative relation however does not hold for non industrialized countries for which learning by doing may not to be the main engine of growth 2000 elsevier science b v all rights reserved jel classixcation o40 e32

efficiency wages and the business cycle puzzle abstract the main thrust of this work is to open the real business cycle rbc methodology to non walrasian considerations and reciprocally to submit some non walrasian models to the discipline of the rbc approach in doing so we provide a first rbc model with involuntary unemployment and a suboptimal equilibrium path we also demonstrate the promise and difficulty of resolving the business cycle puzzle by appealing to quantity rationing in the labor market

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

another look at swedish business cycles 1861 1988 this paper considers nine long swedish macroeconomic time series whose business cycle properties were discussed by englund persson and svensson 1992 using frequency domain techniques it is found by testing that all but two of the logarithmed and differenced series are nonlinear the observed nonlinearity is characterized by star models the statistical and dynamic properties of the estimated star models are investigated using among other things parametrically estimated local or sliced spectra cyclical variation at business cycle frequencies does not seem to be constant over time for all series and it is difficult to find a swedish business cycle only two series may be regarded as having genuinely asymmetric cyclical variation standard granger noncausality tests are adapted to the nonlinear star case and the null hypothesis of noncausality is tested for pairs of series the results point at strong temporal interactions between series they also indicate that the assumption of functional form linear or star strongly affects the outcome of these pairwise tests

common factors in latin america s business cycles this paper constructs new business cycle indices for argentina brazil chile and mexico based on common dynamic factors extracted from a comprehensive set of sectoral output external trade fiscal and financial variables the analysis spans the 135 years since the insertion of these economies into the global economy in the 1870s the constructed indices are used to derive a business cycle chronology for these countries and characterize a set of new stylized facts in particular we show that all four countries have historically displayed a striking combination of high business cycle volatility and persistence relative to benchmark countries and that such volatility has been time varying with important differences across policy regimes we also uncover a sizeable common factor across the four economies which has greatly limited scope for regional risk sharing

when credit bites back using data on 14 advanced countries between 1870 and 2008 we document two key facts of the modern business cycle relative to typical recessions financial crisis recessions are costlier and more credit intensive expansions tend to be followed by deeper recessions in financial crises or otherwise and slower recoveries we use local projection methods to condition on a broad set of macro economic controls to study how past credit accumulation impacts key macro economic variables such as output investment lending interest rates and inflation the facts that we uncover lend support to the idea that financial factors play an important role in the modern business cycle

international real business cycles among heterogeneous countries abstract business cycle statistics differ widely across countries for some aggregates especially for trade related variables part of these variations relates to the size of the economies and to their distance from each other this paper asks whether a three country model is able to display the marked diversity of business cycle statistics observed across countries the model is calibrated to two specific examples canada and switzerland our findings are that most of the diversity of the business cycles can be accounted for by size and distance and that trade is not a strong channel of diffusion of cycles

empirics of world income inequality this article employs a common general formula for inequality indexes to answer several basic questions about intercountry income inequality in recent decades has inequality across nations increased or declined and why have earlier studies yielded mixed results have different rates of population growth played a significant role in the trend have large nations dominated the trend are the results robust over different inequality measures and different income series two findings stand out first different rates of population growth in rich and poor nations played the predominant role in determining change in the distribution of per capita income across nations second the centuries old trend of rising inequality leveled off from 1960 to 1989 the dependency theory thesis of a polarizing world system receives no support

business cycles in switzerland a comparative study abstract the goal of this paper is to provide an empirical description of business cycles in switzerland and a comparison with business cycles in other countries we adopt a view of business cycles as a set of regularities in the movements and the co movements of economic aggregates common to all decentralized economies lucas 1977 and test whether switzerland conforms to this view in order to identify the appropriate cyclical series we follow a procedure proposed by hodrick and prescott 1980 we then compute correlations of various types we test their stability through time and compare with corresponding estimates for the u s france germany and the u k

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

the scope for monetary independence in exchange rate target zones broad and narrow abstract placing limits on the movement of economic fundamentals in order to maintain an exchange rate within a target zone also puts a target zone around interest rate differentials the bandwidth of exchange rate and interest rate differentials target zones will be different except at one point it is suggested that this point gives a useful partitioning of target zones into broad and narrow categories for realistic parameter values this occurs at an exchange rate target zone of plus or minus 3 2

business cycles in the united kingdom facts and fictions this paper documents the statistical properties of contemporary business fluctuations in the united kingdom we study the period 1956 90 using quarterly detrended data on key aggregate variables we compute selected moments of the data compare our results with those for the united states and rigorously test for dynamic instabilities our findings confirm the existence of substantive cyclical regularities both across countries and across time some notable cross country differences are also identified conclusions about stability are shown to be potentially sensitive to the method of testing in general cross correlations are appreciably more stable than standard deviations

detrending stylized facts and the business cycle the stylized facts of macroeconomic time series can be presented by fitting structural time series models within this framework we analyse the consequences of the widely used detrending technique popularised by hodrick and prescott 1980 it is shown that mechanical detrending based on the hodrick prescott filter can lead investigators to report spurious cyclical behaviour and this point is illustrated with empirical examples structural time series models also allow investigators to deal explicitly with seasonal and irregular movements that may distort estimated cyclical components finally the structural framework provides a basis for exposing the limitations of arima methodology and models based on a deterministic trend with a single break

the limits of business cycle research assessing the real business cycle model the real business cycle model dominates business cycle research in the new classical tradition typically real business cycle modelers both offer the bold conjecture that business cycles are equilibrium phenomena driven by technology shocks and also novel strategies for assessing the success of the model this article critically examines the real business model and the assessment strategy surveys the literature supporting and opposing the model and evaluates the evidence on the empirical success of the model it argues that on the preponderance of the evidence the real business cycle model is refuted copyright 1997 by oxford university press

changes in business cycles evidence and explanations this paper shows that the volatility of annual real macroeconomic indicators for the united states and the average severity of recessions have declined only slightly between the pre world war i and post world war ii eras recessions have however become somewhat less frequent and more uniform it argues that the advent of macroeconomic policy after world war ii can account for both the observed continuity and change countercyclical monetary policy and automatic stabilizers have prolonged postwar expansions and prevented severe depressions at the same time policy induced booms and recessions have led to continued volatility of the postwar economy

international inequalities in human development and real income abstract two well recommended measures are used to compute intercountry inequalities in real gdp per capita ry and the index of human development hdi despite very high positive correlation between ry and hdi the inequality measures reveal dramatically different pictures

co2 emissions and economic activity short and long run economic determinants of scale energy intensity and carbon intensity we analyze the short term and the long term determinants of energy intensity carbon intensity and scale effects for eight developed economies and two emerging economies from 1973 to 2007 our results show that there is a difference between the short term and the long term results and that climate policy are more likely to affect emission over the long term than over the short term climate policies should therefore be aimed at a time horizon of at least 8 years and year on year changes in emissions contains little information about the trend path of emissions in the long run capital accumulation is the main driver of emissions productivity growth reduces the energy intensity while the real oil price reduces both the energy intensity and the carbon intensity the real oil price effect suggests that a global carbon tax is an important policy tool to reduce emissions but our results also suggest that a carbon tax is likely to be insufficient decouple emission from economic growth such a decoupling is likely to require a structural transformation of the economy the key policy challenge is thus to build new economic structures where investments in green technologies are more profitable

the relationship between cash flow and investment in the united states at business cycle frequencies 1997 the relationship between cash flow and investment in the united states at business cycle frequencies applied economics vol 29 no 10 pp 1283 1293

comparisons of business cycles in the ec idiosyncracies and regularities annual data since 1960 and the real business cycle model as a guidance the evidence suggests that there are remarkable similarities between the business cycle pattern of these countries despite significant differences in the patterns of fiscal and monetary policies and the terms of trade we take this evidence to suggest that the type of shocks and the propagation mechanism is fairly similar across the ec countries hence the process of european integration under a set of uniform institutions and policies should not be a problem as far as the business cycle is concerned

the world distribution of income falling poverty and convergence period we estimate the world distribution of income by integrating individual income distributions for 138 countries between 1970 and 2000 country distributions are constructed by combining national accounts gdp per capita to anchor the mean with survey data to pin down the dispersion poverty rates and head counts are reported for four specific poverty lines rates in 2000 were between one third and one half of what they were in 1970 for all four lines there were between 250 and 500 million fewer poor in 2000 than in 1970 we estimate eight indexes of income inequality implied by our world distribution of income all of them show reductions in global inequality during the 1980s and 1990s

true world income distribution 1988 and 1993 first calculation based on household surveys alone the paper derives world income or expenditure distribution of individuals for two years 1988 and 1993 it is the first paper to calculate world distribution for individuals based entirely on household survey data from 91 countries and adjusted for differences in purchasing power parity between the countries measured by the gini index inequality increased from an already very high 63 in 1988 to 66 in 1993 the increase was driven more by rising differences in mean incomes between the countries than by rising inequalities within countries the most important contributors were rising urban rural differences in china and slow growth of rural incomes in south asia compared to several large developed market economies

structural unemployment cyclical unemployment and income inequality this is the first study that decomposes unemployment into its structural and cyclical components and investigates their impact on income distribution controlling for the influence of inflation increases in structural unemployment have a substantial aggravating impact on income inequality inflation has a progressive impact which is due to the unexpected component the study demonstrates that previous work failed to take into account the stochastic trend behavior of the variables consequently specifications used by previous research cannot predict the behavior of income shares after 1983 whereas the specification used by this paper generates accurate forecasts the results also indicate that a sustained gnp growth is not necessarily associated with an improvement in income inequality because sustained gnp growth can coexist with increased structural unemployment

asset correlations in single factor credit risk models an empirical investigation abstractthe internal ratings based irb approach based on a single risk factor model was designed by the basel committee on banking supervision bcbs to determine banks regulatory credit risk capital key inputs of the model asset correlations are prescribed by the regulator relevant banks must use them for capital determination to ascertain whether these correlations are too onerous or too lenient empirical asset correlations embedded in loss data spanning different loss milieu were backed out of the regulatory model static and rolling correlations over a period of time were compared with the prescribed correlations for developed and developing economies and found to be significantly more conservative

methodological and empirical issues in real business cycle theory abstract in this paper we argue that the major impact of the rbc literature has been to propose a new methodology for macroeconomics this methodology is distinguished first by the importance it attributes to the empirical description of the phenomena to be explained and second by the use of this description in conjunction with quantitative theorizing i e the construction of computable general equilibrium models whose characteristic statistics match those of the data in accordance with this approach we first report on the current state of knowledge concerning business cycle regularities and conclude that additional empirical effort is called for in order to arrive at the appropriate basis for theorizing we then examine the performance of existing models and evaluate the case for integrating monetary factors and demand shocks into them lastly we review the recent efforts to explain the employment variability puzzle and argue that the search for a solution naturally leads to the incorporation of significant non walrasian features into the rbc framework

international evidence on output fluctuation and shock persistence we estimate output growth rate spectra for 58 countries the spectra exhibit diverse shapes to study the sources of this diversity we estimate the short run business cycle and long run frequency components of the sampled series for most oecd countries the bulk of the spectral mass is in the business cycle frequency band and the magnitude of this cyclical component increases with income for the developing countries however the spectral mass is not concentrated in the business cycle frequency band and the income cycle relationship is not as strong we also estimate two frequency domain measures of shock persistence and find both measures to vary considerably across countries with the u s having the lowest estimates for the oecd countries most of the variation in the variance ratio statistic appears to be explained by the variation in the long term growth component

global inequality in well being dimensions abstract this paper contributes to the literature on global inequality in multidimensional well being by examining inter country disparities in the longevity knowledge and standard of material living components of the well known and widely used human development index for the years 1992 2004 it differs from previous studies by examining global inequality in each of the components of this index alongside that of the index as a whole thus side stepping ambiguities over weighting that are inherent to multidimensional well being indices the gini coefficient both population and non population weighted is used to measure the extent of inequality results indicate that the different components often provide very different information to the index as a whole especially with respect to changes in global inequality over time most component variables show declines in global inequality whereas the longevity component exhibits increased inequality since 1992

ciclos economicos e metodos de filtragem fatos estilizados para o caso brasileiro the paper examines the business cycle properties of a small set of real brazilian macroeconomic time series using a variety of detrending methods it is shown that both quantitatively and qualitatively stylized facts of brazilian business cycle vary widely across detrending methods and that alternative detrending filters extract different types of information from the data the paper also provides simulations of the hansen and prescott s 1995 and hansen s 1985 dynamic general equilibrium models the standard rbc model and the indivisible labor model and tries to match the facts of the artificial economy with those of the real economy implications and suggestions for current macroeconomic practice are provided

swedish business cycles 1861 1988 abstract we examine swedish business cycle data for 1861 1988 in the time domain as well as in the frequency domain there is evidence of a business cycle in the form of considerable spectral mass for cycles between three and eight years the variability of the series varies considerably over time for most series it is highest in the inter war period relative variability is fairly stable over time cross section ratios between moving standard deviations for the series do not change much comovements are also stable over time correlation coefficients do not change much either

business cycles under monetary union a comparison of the eu and us reserve districts in the usa and the 15 countries that make up the eu the comparison is suggestive of what might be expected to emerge in the way of business cycle synchronization from a monetary union between the member states of the eu now simply non decimal denominations of the euro and the national central banks of the 11 are branches of the european system of central banks many prominent observers doubted that europe would ever reach this stage and many continue to believe that monetary union between such a large and dispar ate group of countries is fundamentally unsound a key element in the argu ments of many critics of emu is the degree of business cycle asynchronicity between the member states of the eu this paper contributes to the ongoing debate by documenting key differences and similarities between business cycles in the eu and business cycles in the 12 federal reserve districts in the united states the practice of looking to the us experience for insights into the problems and functioning of a monetary union has a long precedent in the literature on fixed exchange rates in general and in the literature on emu in particular for example in making an argument for fixed exchange rates rolnick and weber 1994 note that the usa can be viewed as having a system of fixed exchange rates between currencies issued by the 12 regional federal reserve banks they argue that the notes issued by the 12 banks are not strictly ident ical and that the difference between the notes creates the possibility that the united states could have a system of floating exchange rates among the 12 federal reserve districts 1 rolnick and weber go on to examine the features of the relationship among the 12 regional federal reserve banks that make a system of fixed exchange rates between them feasible in the process drawing lessons for how a monetary union among the countries of the eu might work the analysis in this paper complements earlier analyses in a number of ways the resurgence of interest in business cycle research over the past 20

swedish postwar business cycles generated abroad or at home the relative importance of foreign and domestic shocks for the swedish postwar business cycle is examined in a neoclassical stochastic growth model of a small open economy since recent research has shown that fiscal policy shocks may be important for business cycles i extend previous work in the literature by allowing for stochastic fiscal policy it is found that the introduction of fiscal policy improves the empirical fit of the model although not significantly so when hours worked are detrended with the hp filter the results suggest that domestic shocks are more important than foreign shocks for output fluctuations among the domestic shocks innovations in fiscal policy seem to have been more important than technology shocks during this period foreign shocks are very important for fluctuations in the real exchange rate and the current account

have economic fluctuations been dampened a look at evidence outside the united states abstract until recently economists of all beliefs took it for granted that the severity of economic fluctuations had decreased sharply following world war ii recent work has challenged this view this study attempts to shed light on whether there was a true reduction in the severity of economic fluctuations by examining the experience of six european countries with one exception these countries did not experience a substantial reduction in the severity of the business cycle

cyclical patterns in aggregate economic activity of slovene economy this paper studies cyclic patterns in the slovene economy with spectral analysis it examines if the transition in slovenia was marked by a statistically significant movement of aggregate economic activity which corresponds to the definition of business cycle proposed by mitchell and burns 1946 it finds that in the period 1992 2000 a statistically significant cyclic component is present the cyclic component oscillates with the frequency of 33 3 months the results obtained in this paper suggest that in the observed period two full length cycles can be identified

current account and macroeconomic fluctuations the primary purpose of this study is to establish some stylized facts about current account and macroeconomic fluctuations in sweden another purpose is to propose a multivariate detrending technique which is based on a time series model with common stochastic trends this technique should be useful for establishing stylized facts about macroeconomic fluctuations in general the descriptive statistics in this analysis are thus confined to the transitory components of the time series in contrast with results obtained for other countries we find e g that the current account is procyclical

some empirical evidence on the discouraged worker effect abstract this note produces empirical evidence on the existence of a significant discouraged worker effect in us data namely on the tendency for groups of secondary workers to move in and out of the labor force with the business cycle looking for jobs when these are available while giving up job search during recessions by focusing on the behavior of the not in the labor force series as well as of two of its segments going to school and keeping house at the business cycle frequencies both in the aggregate and for a number of age sex groups the series display a clear counter cyclical pattern thus lending support to the discouraged worker notion

output capital and labor in the short and long run using a new series of capital stock and frequency domain analysis this paper provides new empirical evidence on the relative importance of capital and labor in the determination of output in the short and long run contrary to the common practice in the traditional growth accounting literature of assigning weights of 0 3 and 0 7 to capital and labor inputs respectively the evidence presented here suggests that capital is a far more important factor than labor for determination of output at and near the zero frequency band furthermore i show that the zero frequency labor elasticity of output may well be close to zero or even zero additional findings reported here support the traditional accelerator model of investment as a good description of the long run investment process

volatility and persistence of fluntuations individual production series in italy 1890 1985 the analysis is focused on possible time related changes in the cyclical behaviour of production using a set of individual production series disaggregate data are used to analyse whether short run fluctuations have actually become less extreme or erratic in time and whether the tendency of shocks to have permanent or transitory effects has changed between the pre war and post war eras a third aspect of cyclical trends examined concerns the correlation of short term changes across sectors the main finding of the paper is that there has been little change in the behaviour of the individual series over time in fluctuation size persistence and frequency thus a reduction in variability appears also to be due to a problem of statistical measurement rather then suggesting as the standard literature does that demand shocks were unimportant in the post war period which implies that supply shocks were more important an estimate of the italian experience gives evidence of the importance of both causes

convergence of interest rates around the pacific rim this article applies the panel data unit root tests provided by im pesaran and shin discussion paper 1997 to examine the interest rate convergence of small open asian countries with major financial centres with monthly data from 1988 1 to 1997 6 it was found that the nominal interest rates of these countries converge to the us rates rather than to japan s this finding is consistent with the view that the monetary authorities of non japan asian economies pegged their exchange rates overwhelmingly to the dollar rather than the yen before the financial crisis of 1997

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

inequality among world citizens 1820 1992 this paper investigates the distribution of well being among world citizens during the last two centuries the estimates show that inequality of world distribution of income worsened from the beginning of the 19th century to world war ii and after that seems to have stabilized or to have grown more slowly in the early 19th century most inequality was due to differences within countries later it was due to differences between countries inequality in longevity also increased during the 19th century but then was reversed in the second half of the 20th century perhaps mitigating the failure of income inequality to improve in the last decades jel d31 f0 n0 o0