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Working Papers NATIONAL AND SUPRANATIONAL BUSINESS CYCLES (1960-2000): A MULTIVARIATE DESCRIPTION OF CENTRAL G7 AND EURO15 NIPA AGGREGATES

Bernd Süssmuth* CESifo Working Paper No. 658 (5)

January 2002 Category 5: Fiscal Policy, Macroeconomics and Growth

CESifo Center for Economic Studies & Ifo Institute for Economic Research Poschingerstr. 5, 81679 Munich, Germany Phone: +49 (89) 9224-1410 - Fax: +49 (89) 9224-1409 e-mail: [email protected] ISSN 1617-9595

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An electronic version of the paper may be downloaded • from the SSRN website: http://papers.ssrn.com/abstract=301262 • from the CESifo website: www.CESifo.de

* Comments are appreciated. So far, I thank Claude Hillinger for his comments and suggestions.

CESifo Working Paper No. 658 January 2002

NATIONAL AND SUPRANATIONAL BUSINESS CYCLES (1960-2000): A MULTIVARIATE DESCRIPTION OF CENTRAL G7 AND EURO15 NIPA AGGREGATES Abstract This paper applies volatility measures and VAR spectral analytic techniques to give a thorough description of the salient business cycle characteristics of central NIPA aggregates for the G7. Furthermore, their role in contributing to the supranational G7 and EURO15 cyclic dynamics is investigated. Several refinements of conventional methods are suggested. Three different detrending filters are used, including ones that tend to distort the spectrum in opposite directions. As advocated in the literature, features of the spectra which survive these different detrending procedures are considered to be robust. The study reveals evidence of significant classical business cycles with frequencies corresponding to about two to four and about seven to ten years period lengths that are both reflected also in the spectra of the two supranational economies.The central findings are summarized with regard to (i) national product share, contribution-to-variance and volatility charateristics, (ii) explained variance and prominence of the cyclicalities contained in the different macro-aggregates and (iii) lead-lag and coherence relationships with national and supranational product cycles. JEL Classification: E32. Keywords: business cycle dynamics, spectral analysis, volatility.

Bernd Süssmuth Department of Economics University of Munich 80539 Munich Germany [email protected]

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