Identifying Sources of Business Cycle Fluctuations in Germany 1975-1998

20 Pages Posted: 8 Oct 2008

See all articles by Oliver Holtemöller

Oliver Holtemöller

Halle Institute for Economic Research; Martin Luther University Halle-Wittenberg

Torsten Schmidt

Rhine-Westphalia Institute for Economic Research (RWI)

Date Written: September 1, 2008

Abstract

In this paper, we estimate a small New Keynesian dynamic stochastic general equilibrium (DSGE) model for Germany for the period from 1975 to 1998 and use it to identify the structural shocks, which have driven the business cycle. For this purpose we apply indirect inference methods, that is we specify the parameters of the theoretical model such that simulated data mimics observed data as closely as possible. In addition to the identification of structural shocks, we uncover the unobservable output gap, which is a prominent indicator in business cycle analysis. Furthermore, we show to which extent each identified shock has contributed to the business cycle fluctuations.

Keywords: Business cycle accounting, dynamic stochastic general equilibrium models, Germany, indirect inference, New Keynesian macroeconomics

JEL Classification: C32, C51, E32

Suggested Citation

Holtemöller, Oliver and Schmidt, Torsten, Identifying Sources of Business Cycle Fluctuations in Germany 1975-1998 (September 1, 2008). Ruhr Economic Paper No. 68, Available at SSRN: https://ssrn.com/abstract=1280926 or http://dx.doi.org/10.2139/ssrn.1280926

Oliver Holtemöller (Contact Author)

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Martin Luther University Halle-Wittenberg ( email )

Halle-Wittenberg, Sachsen-Anhalt
Germany

Torsten Schmidt

Rhine-Westphalia Institute for Economic Research (RWI) ( email )

45128 Essen
Germany

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