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

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Presentation on theme: "Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Capitolo 14 Cicli economici."— Presentation transcript:

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

2 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Actual and Trend GDP, Detrended GDP UK: Fig

3 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.1 (a) Actual and trend GDP, UK, Fig (a) Q1/1963Q1/1969Q1/1975Q1/1981Q1/1987Q1/1993Q1/1999 Billions of 1995 Pounds GDP in 1995 pricesTrend

4 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.1 (b) Real GDP in the UK, deviation from trend (%) Fig (b) Q1/1963Q1/1969Q1/1975Q1/1981Q1/1987Q1/1993Q1/ Deviation from Trend (%)

5 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Table 14.1 Descriptive statistics of business cycles Table No. ofAv. cycle lengthMaximumMinimumAv. Deviation completed cycles peak to peakcycle length from midpoint (%) (quarters) UK France Germany Italy Japan USA Source: OECD Main Economic Indicators database, authors' calculations.

6 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Burns-Mitchell Diagrams for Real GDP: Eight countries, Fig

7 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.2 (a) Burns-Mitchell diagrams for real GDP, Fig (a) UK France Italy Germany

8 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.2 (b) Burns-Mitchell diagrams for real GDP, Fig (b) Japan Spain US Canada

9 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.2 (c) Overall reference cycle average (8 countries) Fig (c)

10 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Table 14.2 Business cycle correlations of macroeconomic variables with output Table ConsumptionInvestment Government spendingExportsImportsPricesInflation EU Japan USA Source: OECD Main Economic Indicators database * Correlation coefficient of seasonally adjusted and detrended values using the Hodrick-Prescott filter.

11 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Leading and Lagging Indicators, (Eight countries) Fig

12 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (a) Changes in inventories Fig (a)

13 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (b) Real stock prices Fig (b)

14 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (c) Capacity utilisation rate Fig (c)

15 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (d) Real effective exchange rate Fig (d)

16 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (e) Standardised unemployment rate Fig (e)

17 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (f) Inflation Fig (f)

18 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (g) Real money balances Fig (g)

19 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (h) Short-term nominal interest rate Fig (h)

20 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (i) Long-term nominal interest rate Fig (i)

21 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.3 (j) Differential long- vs. short-term interest rate Fig (j)

22 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Table 14.3 Variability* of key macro variables over the cycle Table GDP (%) ConsumptionInvestmentGovernment purchases ExportsImportsPrices (GDP deflator) EU Japan USA *Variability is measured as the stantard deviation of seasonally adjusted and detrended values using the Hodrick-Prescott filter. Source: OECDMain Economic Indicators andNational Accountsdatabases

23 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Components of Aggregate Spending, (Eight Countries) Fig

24 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.4 (a) Private final consumption expenditure Fig (a)

25 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.4 (b) Investment (gross fixed capital formation) Fig (b)

26 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.4 (c) Government final consumption expenditure Fig (c)

27 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.4 (d) Primary current account/GDP Fig (d)

28 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.5 Deterministic cycles in the multiplier-accelerator model Fig

29 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.5 (a) Deterministic cycles: dampened variant Time Output Fig (a)

30 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.5 (b) Deterministic cycles: explosive variant Time Output Fig (b)

31 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.5 (c) Deterministic cycles: perpetual variant Time Output Fig (c)

32 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.6 Impulse-propagation mechanism Fig

33 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.6 Impulse-propagation mechanism Economic System Cycles Random Shocks Fig

34 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.7 Impulses and propagations: an example 200 random shocks, t (normal distribution, mean=0, st.dev.=0.3) Filtered shocks: Y t = 1.3Y t-1 –0.4Y t-1 + t Fig

35 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Propagating mechanism in AS-AD framework Fig

36 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Left: AS and AD Right: Just observations Fig

37 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 There is an increase in the rate of money growth Fig

38 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Core inflation adjusts and AS shifts upwards Fig

39 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Lagged responses of AD to the change in money growth leads to further shift of AD Fig

40 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Further upward shift in core inflation and AS Fig

41 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Fall in output from C to D leads to drop in AD´´... Fig

42 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Economy followed a loop in response to change in rate of growth of the money supply 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

43 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Higher inflation and high output case 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

44 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Higher inflation, low output case 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

45 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Lower inflation, low output case 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

46 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.8 Lower inflation, high output case 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

47 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure 14.9 Demand shock to West Germany (Unification) Fig

48 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure %-1%0%1%2%3% Output (deviations from trend) Inflation (%) Counterclockwise loop observed in W. Germany Fig

49 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Oil price shock of : Supply shock Fig

50 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure (a) Riding out an adverse supply shock without an AD response Output gap Inflation A AD AS B AS´ AS A A Fig (a) 0

51 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA %-2%-1%0%1%2%3%4%5% Output (deviations from trend) Inflation (%) Figure (c) United Kingdom. Oil price shock Fig (c)

52 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure (a) Responding to adverse supply shock with AD policy (militant anti-inflationist) Inflation A AD C AS AD´ AD AS´ AS A A D Fig (a) Output gap0

53 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure (b) %-2%-1%0%1%2%3%4%5% Output (deviations from trend) Inflation (%) Switzerland. Oil price shock Fig (b)

54 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Table 14.4 Variance of GDP decomposed (percent) Source: Gerlach and Smets (1995) Technical note: One year after shock, 1979:1–1993:4 DemandSupplyMoneyTotal Canada France Germany Italy Japan UK USA

55 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure The Solow Residual and GDP Germany, Fig

56 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure W. Germany: Solow residual and GDP growth Percent per year Output Solow residual Fig

57 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure A productivity shock that increases the marginal products of capital and labour Fig

58 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure When labour supply is inelastic... Real interest rate Capital stock Real wage Labour A´ A A L S(inelastic)...relatively large change in real wage Fig

59 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Real interest rate Capital stock Real wage Labour A A A´´ L S(elastic) When labour supply is elastic......relatively small change in real wage A´...and a large change in employment! Fig

60 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Intertemporal substitution of labour Fig

61 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Intertemporal substitution of labour Leisure today Leisure tomorrow A B Current wage increase......(as drawn) leads to substitution of less leisure today for more leisure tomorrow. Fig

62 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Cyclical patterns in the labour market, G8 countries, Fig

63 Burda, WyploszMACROECONOMIA: UNA PROSPETTIVA EUROPEA ©EGEA 2006 Figure Cyclical patterns in the G8 labour markets Fig


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