International Evidence on the Historical Properties of Business Cycles

Abstract

We contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century. Although the magnitude of output fluctuations has varied across countries and periods, relations among real quantities have been remarkably uniform. Properties of price levels, however, exhibit striking differences between periods. Inflation rates are more persistent after World War II than before, and price level fluctuations are typically procyclical before World War II, countercyclical afterward. Fluctuations in money are less highly correlated with output in the postwar period, but are no more persistent than in early periods.

Business Cycles under Monetary Union: A Comparison of the EU and US

“…(Note also that, whereas we find statistically insignificant positive correlations between the cyclical components of output in Denmark and Italy and Denmark and Belgium, Christodoulakis et al (1995) find essentially zero correlation.) There is somewhat greater similarity between the results in our Table 1(a) and those in Table 4 of Backus and Kehoe (1992). As for the volatility of the cyclical component of output (as measured by the percentage standard deviation), Christodoulakis et al (1995) report greater volatility in every case, with differences ranging from 0.2 to 1.07 percentage points.…”

“…As for the volatility of the cyclical component of output (as measured by the percentage standard deviation), Christodoulakis et al (1995) report greater volatility in every case, with differences ranging from 0.2 to 1.07 percentage points. Backus and Kehoe (1992) also report greater volatility when the entire postwar period is looked at. Qualitatively, our findings on the volatility of GDP (Germany, Italy and the UK are all more volatile than France) are consistent with the findings of Fiorito and Kollintzas (1994) and Danthine and Donaldson (1993).…”

“…This parameter does not have a very intuitive interpretation, and the difficulties are compounded when we have to work with data that are sampled less frequently than quarterly. For example, to characterize business cycle fluctuations in annual data, Backus and Kehoe (1992) set λG100 in their study of international business cycles, while Englund et al (1992) set λG400 to isolate the cyclical component of economic activity in annual Swedish data. Baxter and King show that, if the objective is to isolate in annual data fluctuations at the same frequency as those isolated by setting λG1600 in quarterly data, a setting of λG10 is probably more appropriate.…”

“…Given our definition of the cyclical component of economic activity, we summarize its features using just two statistics: the percentage standard deviations, and the pairwise correlation coefficients of the cyclical components of the aggregate variables we look at. Following Backus and Kehoe (1992), we estimate the correlation coefficients and the associated standard errors using generalized methods of moments (GMM) estimation (see Hansen 1982;Ogaki 1993a, b). The use of GMM allows us to obtain estimates of the standard errors of the correlation coefficients that are corrected for autocorrelation and heteroskedasticity.…”

“…The resurgence of interest in business cycle research over the past 20 years has inevitably included analyses of international business cycles. For example, Backus and Kehoe (1992) document the business cycle behaviour of output, the price level and the money stock in 10 countries over a 100-year period. Their choice of countries is dictated by data availability and includes [AUGUST only five of the current 15 EU members.…”