Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Capitolo 14 Cicli economici

Burda, Wyplosz MACROECONOMIA: UNA PROSPETTIVA EUROPEA

©EGEA 2006

Capitolo 14

Cicli economici


©EGEA 2006

Actual and Trend GDP, Detrended GDPUK: 1963-2002

Fig. 14.01


©EGEA 2006

Actual and trend GDP, UK, 1963-2002

Fig. 14.01 (a)

300

400

500

600

700

800

900

Q1/1963 Q1/1969 Q1/1975 Q1/1981 Q1/1987 Q1/1993 Q1/1999

Bill

ion

s o

f 19

95 P

oun

ds

GDP in 1995 prices Trend


©EGEA 2006

Real GDP in the UK, deviation from trend (%)

Fig. 14.01 (b)

Q1/1963 Q1/1969 Q1/1975 Q1/1981 Q1/1987 Q1/1993 Q1/1999-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

De

via

tion

fro

m T

rend

(%

)


©EGEA 2006

Descriptive statistics of business cycles1963-2002

Table 14.01

No. of Av. cycle length Maximum Minimum Av. Deviation completedcycles

peak to peak cycle length cycle length from midpoint(%)(quarters) (quarters) (quarters)

UK 4 21.5 25 19 4.2France 3 28.0 38 14 2.0Germany 5 19.0 27 11 3.8Italy 5 20.2 40 10 2.2Japan 2 46.5 73 20 4.0USA 4 31.3 42 17 3.4

Source: OECD Main Economic Indicators database, authors' calculations.


©EGEA 2006

Burns-Mitchell Diagrams for Real GDP:Eight countries, 1963-2002

Fig. 14.02


©EGEA 2006

Burns-Mitchell diagrams for real GDP, 1963-2002

Fig. 14.02 (a)

UK

0.86

0.88

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

-10 -8 -6 -4 -2 0 2 4 6 8 10

France

0.88

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06

-10 -8 -6 -4 -2 0 2 4 6 8 10

Italy

0.86

0.88

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06

-10 -8 -6 -4 -2 0 2 4 6 8 10

Germany

0.86

0.88

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Burns-Mitchell diagrams for real GDP, 1963-2002

Fig. 14.02 (b)

Japan

0.82

0.84

0.86

0.88

0.90

0.92

0.94

0.96

0.98

1.00

1.02

-10 -8 -6 -4 -2 0 2 4 6 8 10

Spain

0.88

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

-10 -8 -6 -4 -2 0 2 4 6 8 10

US

0.86

0.88

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06

-10 -8 -6 -4 -2 0 2 4 6 8 10

Canada

0.84

0.86

0.88

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Overall reference cycle average (8 countries)1963-2002

Fig. 14.02 (c)

0.84

0.88

0.92

0.96

1.00

1.04

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Business cycle correlations of macroeconomic variables with output

1968-2002

Table 14.02

Consumption InvestmentGovernment

spending Exports Imports Prices Inflation

EU 0.86 0.90 -0.15 0.85 0.94 -0.45 0.30Japan 0.71 0.89 -0.03 0.47 0.64 -0.15 0.18USA 0.88 0.95 0.04 0.32 0.75 -0.75 0.15

Source: OECD Main Economic Indicators database

* Correlation coefficient of seasonally adjusted and detrended values using the Hodrick-Prescott filter.


©EGEA 2006

Leading and Lagging Indicators, 1968-2002(Eight countries)

Fig. 14.03


©EGEA 2006

Changes in inventories

Fig. 14.03 (a)

-0.6

-0.3

0.0

0.3

0.6

0.9

1.2

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Real stock prices

Fig. 14.03 (b)

0.85

0.90

0.95

1.00

1.05

1.10

1.15

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Capacity utilisation rate

Fig. 14.03 (c)

0.92

0.94

0.96

0.98

1.00

1.02

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Real effective exchange rate

Fig. 14.03 (d)

0.99

1.00

1.01

1.02

1.03

1.04

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Standardised unemployment rate

Fig. 14.03 (e)

0.9

1.0

1.1

1.2

1.3

1.4

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Inflation

Fig. 14.03 (f)

0.015

0.017

0.019

0.021

0.023

0.025

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Real money balances

Fig. 14.03 (g)

0.96

0.98

1.00

1.02

1.04

1.06

1.08

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Short-term nominal interest rate

Fig. 14.03 (h)

0.7

0.8

0.9

1.0

1.1

1.2

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Long-term nominal interest rate

Fig. 14.03 (i)

0.84

0.88

0.92

0.96

1.00

1.04

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Differential long- vs. short-term interest rate

Fig. 14.03 (j)

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Variability* of key macro variables over the cycle1964-2002

Table 14.03

GDP(%)

Consumption Investment Government purchases

Exports Imports Prices (GDP deflator)

EU 0.95 0.86 2.52 0.53 2.44 3.07 0.94Japan 1.18 0.81 2.43 0.71 3.28 4.44 0.65USA 1.61 0.80 2.68 0.77 2.68 3.12 0.54

*Variability is measured as the stantard deviation of seasonally adjusted and detrended values using the Hodrick-Prescott filter.

Source: OECD Main Economic Indicators and National Accounts databases


©EGEA 2006

Components of Aggregate Spending, 1968-2002(Eight Countries)

Fig. 14.04


©EGEA 2006

Private final consumption expenditure

Fig. 14.04 (a)

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06

1.08

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Investment (gross fixed capital formation)

Fig. 14.04 (b)

0.92

0.94

0.96

0.98

1.00

1.02

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Government final consumption expenditure

Fig. 14.04 (c)

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Primary current account/GDP

Fig. 14.04 (d)

-0.005

0.000

0.005

0.010

-10 -8 -6 -4 -2 0 2 4 6 8 10


©EGEA 2006

Deterministic cyclesin the multiplier-accelerator model

Fig. 14.05


©EGEA 2006

Deterministic cycles: dampened variant

-8

-6

-4

-2

0

2

4

6

8

0 20 40 60 80 100

Time

Ou

tpu

t

t t -1 t -2Y = Y - Y1.82 1.02

Fig. 14.05(a)


©EGEA 2006

Deterministic cycles: explosive variant

-20

-15

-10

-5

0

5

10

15

20

0 20 40 60 80 100

Time

Ou

tpu

t

t t -1 t -2Y = Y -Y1.8

Fig. 14.05(b)


©EGEA 2006

Deterministic cycles: perpetual variant

-8

-6

-4

-2

0

2

4

6

8

0 20 40 60 80 100

Time

Ou

tpu

t

t t -1 t -2Y = Y - Y1.78 0.98

Fig. 14.05(c)


©EGEA 2006

Impulse-propagation mechanism

Fig. 14.06


©EGEA 2006

Impulse-propagation mechanism

Economic System

CyclesRandom Shocks

Fig. 14.06


©EGEA 2006

Impulses and propagations: an example

200 random shocks, t (normal distribution, mean=0, st.dev.=0.3)

Filtered shocks: Yt = 1.3Yt-1 –0.4Yt-1+ t

Fig. 14.07

-2

-1

0

1

2

-3

-2

-1

0

1

2

3


©EGEA 2006

Propagating mechanism in AS-AD framework

Fig. 14.08


©EGEA 2006

0

Left: AS and AD Right: Just observations

AD

AS

A

Y -Y

0Y -Y

A

Fig. 14.08


©EGEA 2006

0

ADADAD

There is an increase in the rate of money growth

AS

A

AD

AS

A

B

Y -Y Y -Y

0

Fig. 14.08


©EGEA 2006

Core inflation adjusts and AS shifts upwards

ADAD

ASASAS

A

AD

AS

A

B

Y -Y Y -Y

0 0

Fig. 14.08


©EGEA 2006

Lagged responses of AD to the change in money growth leads to further shift of AD

AD

AS

AD

AS

A

AD

AS

A

B

C

Y -Y Y -Y

0 0

ADAD

Fig. 14.08


©EGEA 2006

Further upward shift in core inflation and AS

AD

AS

ADAD

AS

A

AD

AS

A

B

CD

Y -Y Y -Y

0 0

ASAS

Fig. 14.08


©EGEA 2006

Fall in output from C to D leads to drop in AD´´...

AD

AS

ADAD

ASAS

A

AD

AS

AB

CD

B

CD

Y -Y Y -Y

0 0

Fig. 14.08


©EGEA 2006

Economy followed a loop in response to change in rate of growth of the money supply

AD

AS

A

Y -Y

0

When > , M/P falling so AD shifts left.

When < , M/P rising so AD shifts right.

When output gap is positive,> core inflation (AS has a positive slope), so AS shifts up.

When output gap is negative, < core inflation, so AS shifts down.

Fig. 14.08


©EGEA 2006

Higher inflation and high output case

AD

AS

Y -Y

0

When > ´, M/P falling so AD shifts left.

When < ´, M/P rising so AD shifts right.



Fig. 14.08


©EGEA 2006

Higher inflation, low output case

AD

AS

Y -Y

0





Fig. 14.08


©EGEA 2006

Lower inflation, low output case

ADAS

Y -Y

0





Fig. 14.08


©EGEA 2006

Lower inflation, high output case

AD

AS

Y -Y

0





Fig. 14.08


©EGEA 2006

Demand shock to West Germany (Unification)

Fig. 14.09


©EGEA 2006

1994

1993

0.0

1.0

2.0

3.0

4.0

5.0

-2% -1% 0% 1% 2% 3%

Output (deviations from trend)

Infla

tion

(%

)

Counterclockwise loop observed in W. Germany

Fig. 14.09

1992

1991

1990


©EGEA 2006

Oil price shock of 1973-4: Supply shock

Fig. 14.10


©EGEA 2006

Riding out an adverse supply shockwithout an AD response

Output gap

Infla

tion

A

AD

ASB

AS´

AS

AA

Fig. 14.10(a)

0


©EGEA 2006

1977

0

5

10

15

20

25

-3% -2% -1% 0% 1% 2% 3% 4% 5%


Infla

tion

(%)

United Kingdom. Oil price shock 1973-74.

Fig. 14.10(c)

1976

1975

1974

1973


©EGEA 2006

Responding to adverse supply shockwith AD policy (militant anti-inflationist)

Infla

tion

A

AD

C

AS

AD´AD

AS´

AS

AA

D

Fig. 14.10(a)

Output gap0


©EGEA 2006

1977

0

2

4

6

8

10

12

14

-3% -2% -1% 0% 1% 2% 3% 4% 5%


Infl

atio

n (

%)

Switzerland. Oil price shock 1973-74.

Fig. 14.10(b)

1976

1975

19741973


©EGEA 2006

Variance of GDP decomposed (percent)

Source: Gerlach and Smets (1995)

Technical note: One year after shock, 1979:1–1993:4

Demand Supply Money Total

Canada 54 34 12 100France 19 80 1 100Germany 66 31 3 100

Italy 40 51 10 100Japan 11 87 2 100UK 32 64 4 100

USA 20 71 8 100


©EGEA 2006

The Solow Residual and GDPGermany, 1961-1993

Fig. 14.11


©EGEA 2006

W. Germany: Solow residual and GDP growth

-2

-1

0

1

2

3

4

5

6

7

8

1961 1965 1969 1973 1977 1981 1985 1989 1993

Per

cent

per

yea

r

Output

Solow residual

Fig. 14.11


©EGEA 2006

A productivity shock that increases the marginal products of capital and labour

Fig. 14.12


©EGEA 2006

When labour supply is inelastic...

Re

al i

nte

rest

rat

e

Capitalstock

Re

al w

ag

e

Labour

A´

A

1K

A´

A

LS(inelastic)

wr

r

MPK

MPK

w

MPL

MPL

...relatively large change in real wage

Fig. 14.12


©EGEA 2006

Re

al i

nte

rest

rat

e

Capitalstock

Re

al w

ag

e

Labour

A

1K

Aw A´´r

r

MPK

MPK

wLS(elastic)

MPL

MPL

When labour supply is elastic......relatively small change in real wage

A´

...and a large change in employment!

Fig. 14.12


©EGEA 2006

Intertemporal substitution of labour

Fig. 14.13


©EGEA 2006

Intertemporal substitution of labour

Leisure today

Leis

ure

tom

orro

w

A

B

1

2

-w 1+ r

w

w

w L Lr

l l21 1 1 2 21

Current wage increase......(as drawn) leads to substitution of less leisure today for more leisure tomorrow.

Fig. 14.13


©EGEA 2006

Cyclical patterns in the labour market,G8 countries, 1965-2003

Fig. 14.14


©EGEA 2006

Cyclical patterns in the G8 labour markets

Fig. 14.14

Documents

Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Capitolo 14 Cicli economici