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On the sources of business cycles in the G-7

Fabio Canova () and Gianni de Nicoló

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper examines sources of cyclical movements in output, inflation and the term structure of interest rates. It employs a novel identification approach which uses the sign of the cross correlation function in response to shocks to catalog orthogonal disturbances. We find that demand shocks are the dominant source output, inflation and term structure fluctuations in six of the G-7 countries. Within the class of demand disturbances, nominal shocks are dominant, but their importance declined after 1982. Furthermore, there are no significant differences in the proportion of term structure variability explained by different structural sources at different horizons.

Keywords: Structural shocks; business cycles; demand disturbances; dynamic correlations; impulse responses (search for similar items in EconPapers)
JEL-codes: C68 E32 F11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-tid
Date: 1999-10, Revised 2000-03
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:459

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