Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Euro Area Business Cycle: Stylized Facts and Measurement Issues

07.02.2005


In recent years, studies of the euro area business cycle have flourished. However, national statistics have only recently been harmonized and aggregate statistics have only been available for a short period of time. Clearly, there is a need to establish stylized facts for the euro area economies and European Monetary Union gives an opportunity to analyse questions such as whether the loss of independence in the conduct of monetary policy has affected national business cycles. A new Volume published by the Centre for Economic Policy Research (CEPR), ‘The Euro Area Business Cycle: stylized facts and measurement issues’ presents four papers by leading economists that examine different aspects of business cycle measurement for the euro area. CEPR Research Fellow Lucrezia Reichlin, who will begin as head of research at the European Central Bank in February 2005, has edited the Volume.

In their Paper ‘Euro Area and US Recessions, 1970-2003’, Domenico Giannone (ECARES, Université Libre de Bruxelles) and Lucrezia Reichlin (ECARES, Université Libre de Bruxelles and CEPR) analyse the relation between (1) the level cycle: the level of economic activity, and (2) the growth cycle: the rate of economic growth. They use both definitions of economic activity to compare the behaviour of the economies of the euro area and the United States. The Paper starts from the observation that, although level cycles are strikingly similar in the euro area and the US, the growth rate of output in the euro area is less volatile than in the US and more protracted. This implies that the effect of an economic shock from outside the euro area lasts longer than in the US. Giannone and Reichlin use a statistical model of joint US-euro area output behaviour that is able to simulate characteristics of both definitions of economic activity. The model implies that a world technological shock would be immediately absorbed by the US economy but would take longer to be absorbed by the euro area economies. The euro area does eventually catch up with the US but this takes around ten years.

The authors also analyse consumption and conclude that the welfare cost associated with output fluctuations is likely to be larger in the euro area than the US. The Paper provides food for thought for understanding the causes of differences in the economic performance of the euro area and the US and the role played by policy.



‘Predicting Growth Regimes for European Countries’ by Denise Osborn (Centre for Growth and Business Cycle Research, University of Manchester), Marianne Sensier (Centre for Growth and Business Cycle Research, University of Manchester) and Dick van Dijk (Econometric Institute, Erasmus University Rotterdam) analyses national business cycles rather than the euro area aggregate cycle. The authors study the role of a wide range of macroeconomic and financial variables as potential predictors of expansions and recessions in Germany, France, Italy and the UK. The results indicate that international variables matter in most cases and that financial variables are also found to be particularly important. Although the focus of the Paper is forecasting, the analysis helps assess the question of how open the euro area economy is with respect to the US and also how sensitive it is to changing events in financial markets.

‘Dating the Euro Area Business Cycle’ by Michael Artis (European University Institute and CEPR), Masimiliano Marcellino (Università Bocconi, IGIER and CEPR) and Tommaso Proietti (Università di Udine and European University Institute) proposes a number of improvements to standard techniques to detect the peaks and troughs of business cycles that allow them to isolate major fluctuations in economic activity. For the US economy their model produces a good approximation of the turning points in the business cycle that have been identified by the National Bureau of Economic Research. When their model is applied to quarterly output ‘cleaned’ of high-frequency variations, the authors are able to reproduce the dates identified for the euro area business cycle by the CEPR Euro Area Business Cycle Dating Committee. Also, applying their model to GDP growth that has been filtered to extract cycles that are longer than five quarters roughly produces the dates identified by EuroCOIN, CEPR’s monthly indicator of euro area GDP growth.

‘Estimates of Potential Output: Benefits and Pitfalls from a Policy Perspective’ by Jean-Philippe Cotis (OECD Economics Department), Jaergen Elmeskov (OECD Economics Department) and Annabelle Mourougane (OECD Economics Department) discusses the advantages and disadvantages of different measures of potential output and the output gap. The Paper also defines criteria on the basis of which to judge different methodologies.

Robbie Lonie | alfa
Further information:
http://www.cepr.org

More articles from Social Sciences:

nachricht Sibling differences: Later-borns choose less prestigious programs at university
14.11.2017 | Max-Planck-Institut für demografische Forschung

nachricht Visual intelligence is not the same as IQ
09.11.2017 | Vanderbilt University

All articles from Social Sciences >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Artificial agent designs quantum experiments

On the way to an intelligent laboratory, physicists from Innsbruck and Vienna present an artificial agent that autonomously designs quantum experiments. In initial experiments, the system has independently (re)discovered experimental techniques that are nowadays standard in modern quantum optical laboratories. This shows how machines could play a more creative role in research in the future.

We carry smartphones in our pockets, the streets are dotted with semi-autonomous cars, but in the research laboratory experiments are still being designed by...

Im Focus: Scientists decipher key principle behind reaction of metalloenzymes

So-called pre-distorted states accelerate photochemical reactions too

What enables electrons to be transferred swiftly, for example during photosynthesis? An interdisciplinary team of researchers has worked out the details of how...

Im Focus: The first precise measurement of a single molecule's effective charge

For the first time, scientists have precisely measured the effective electrical charge of a single molecule in solution. This fundamental insight of an SNSF Professor could also pave the way for future medical diagnostics.

Electrical charge is one of the key properties that allows molecules to interact. Life itself depends on this phenomenon: many biological processes involve...

Im Focus: Paradigm shift in Paris: Encouraging an holistic view of laser machining

At the JEC World Composite Show in Paris in March 2018, the Fraunhofer Institute for Laser Technology ILT will be focusing on the latest trends and innovations in laser machining of composites. Among other things, researchers at the booth shared with the Aachen Center for Integrative Lightweight Production (AZL) will demonstrate how lasers can be used for joining, structuring, cutting and drilling composite materials.

No other industry has attracted as much public attention to composite materials as the automotive industry, which along with the aerospace industry is a driver...

Im Focus: Room-temperature multiferroic thin films and their properties

Scientists at Tokyo Institute of Technology (Tokyo Tech) and Tohoku University have developed high-quality GFO epitaxial films and systematically investigated their ferroelectric and ferromagnetic properties. They also demonstrated the room-temperature magnetocapacitance effects of these GFO thin films.

Multiferroic materials show magnetically driven ferroelectricity. They are attracting increasing attention because of their fascinating properties such as...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

10th International Symposium: “Advanced Battery Power – Kraftwerk Batterie” Münster, 10-11 April 2018

08.01.2018 | Event News

See, understand and experience the work of the future

11.12.2017 | Event News

Innovative strategies to tackle parasitic worms

08.12.2017 | Event News

 
Latest News

Thanks for the memory: NIST takes a deep look at memristors

22.01.2018 | Materials Sciences

Radioactivity from oil and gas wastewater persists in Pennsylvania stream sediments

22.01.2018 | Earth Sciences

Saarland University bioinformaticians compute gene sequences inherited from each parent

22.01.2018 | Life Sciences

VideoLinks Wissenschaft & Forschung
Overview of more VideoLinks >>>