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Download filePlucking models of business cycle fluctuations: evidence from the G-7 countries
preprint
posted on 2006-03-29, 10:26 authored by Terence Mills, Ping WangFriedman’s ‘plucking’ model, in which output cannot exceed a ceiling
level but is occasionally plucked downward by recessions, is tested using
Kim and Nelson’s formal econometric specification on output data from
the G-7 countries. Considerable support for the model is obtained,
leading us to conclude that during normal periods, output seems to be
driven mostly by permanent shocks, but during recessions and highgrowth
recoveries, transitory shocks dominate. During these periods
macroeconomic models that emphasise demand-oriented shocks, rather
than real business cycle type models, may thus be more appropriate.
Funding
This paper forms part of the ESRC funded project (Award No. L1382511013) “Business Cycle Volatility and Economic Growth: A Comparative Time Series Study”, which itself is part of the Understanding the Evolving Macroeconomy Research programme.
History
School
- Business and Economics
Department
- Economics
Pages
123678 bytesPublisher
© Loughborough UniversityPublication date
2000Notes
This is Business Cycle Volatility and Economic Growth Research Paper No. 00/3.Language
- en