Time-Varying Dynamics of the German Business Cycle: A Comprehensive Investigation

Magnus Reif

No 9271, CESifo Working Paper Series from CESifo

Abstract: This paper provides insights into the time-varying dynamics of the German business cycle over the last five decades. To do so, I employ an open-economy time-varying parameter VAR with stochastic volatility, which I estimate by quasi-Bayesian techniques. The reduced-form analysis reveals substantial shifts in the variables’ long-run growth rates and shock volatilities over time. German trend inflation has strongly decreased and settled at a historically low level. GDP growth volatility exhibits marked fluctuations over time and has dropped to historically low levels only after the global financial crisis. The structural analysis employs externally identified oil supply shocks along with a recursive identification scheme to identify key macroeconomic shocks. The analysis reveals strong fluctuations in both the impact responses of macroeconomic aggregates to these shocks and the shock propagation processes. Thus, I conclude that business cycle stabilization in Germany is driven by both good policy and good luck.

Keywords: time-varying parameters; Bayesian vector autoregression; counterfactuals; stochastic volatility; Great Moderation (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 E58 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-eec, nep-isf, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Time‐Varying Dynamics of the German Business Cycle: A Comprehensive Investigation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9271

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