Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245452 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9271
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper provides insights into the time-varying dynamics of the German business cycle over the last five decades. To do so, I employ an open-economy time-varying parameter VAR with stochastic volatility, which I estimate by quasi-Bayesian techniques. The reduced-form analysis reveals substantial shifts in the variables' long-run growth rates and shock volatilities over time. German trend inflation has strongly decreased and settled at a historically low level. GDP growth volatility exhibits marked fluctuations over time and has dropped to historically low levels only after the global financial crisis. The structural analysis employs externally identified oil supply shocks along with a recursive identification scheme to identify key macroeconomic shocks. The analysis reveals strong fluctuations in both the impact responses of macroeconomic aggregates to these shocks and the shock propagation processes. Thus, I conclude that business cycle stabilization in Germany is driven by both good policy and good luck.
Subjects: 
time-varying parameters
Bayesian vector autoregression
counterfactuals
stochastic volatility
Great Moderation
JEL: 
E31
E32
E52
E58
Document Type: 
Working Paper
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