Declining Output Volatility in Germany : Impulses, Propagation, and the Role of Monetary Policy

Arbeitspapier

We analyse the decline in output volatility in Germany. A lower level of variance in an autoregressive model of output growth can be either due to a change in the structure of the economy (a change in the propagation mechanism) or a reduced error term variance (reduced impulses). In Germany the decline output volatility is due to a decline in the persistence of the growth process. This is in contrast to the U.S. results. The structural change is more of a gradual nature than a sudden break. The evolution of Germany's short-term real interest rate volatility coincides with the change of the autoregressive parameter. A change in the conduct of monetary policy (the establishment of another monetary policy regime) could be part of an explanation for the change in propagation. Stochastic simulations with a New Keynesian DSGE model support our hypothesis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 433

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Model Construction and Estimation ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
• Subject: Output ; Volatility ; Monetary Policy ; Markov Switching Model ; State Space Model ; Spectral Analysis ; DSGE model ; Konjunktur ; Volatilität ; Wirtschaftswachstum ; Hysteresis ; Strukturwandel ; Schätzung ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fritsche, Ulrich ; Kuzin, Vladimir N.
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/18170
• Last update: 10.03.2025, 11:44 AM CET