volatility
The International Business Cycle in a Changing World: Volatility and the Propagation of Shocks in the G-7
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EABCN/CEPR Discussion Paper 10/2004
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Date published:
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October 1, 2004
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Abstract:
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This Paper examines the changing relationships between the G7 countries through VAR models for the quarterly growth rates, estimated both over sub-periods and using a rolling data window. Six trivariate models are estimated, all of which include the US and a European (E15) aggregate. In relative terms, the conditional volatility of E15 growth has declined more since 1980 than the well-documented decline for the US. The propagation of shocks has also changed, with the volatility and propagation effects separated by applying shocks of pre-1980 magnitude to VARs estimated over various periods. Rolling estimation reveals that E15 has a steadily increasing impact on the US economy over time, while the effects of the US on Europe have been largest during the 1970s and the late 1990s.
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Paper:
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Download the paper [1.07 MB]
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