Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Capitolo 14
Cicli economici
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Actual and Trend GDP, Detrended GDP
UK: 1963-2002
©EGEA 2006
Fig. 14.01
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.01 (a)
Actual and trend GDP, UK, 1963-2002
900
Billions of 1995 Pounds
800
GDP in 1995 prices
Trend
700
600
500
400
300
Q1/1963 Q1/1969 Q1/1975 Q1/1981 Q1/1987 Q1/1993 Q1/1999
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.01 (b)
Real GDP in the UK, deviation from trend (%)
6.0
Deviation from Trend (%)
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
Q1/1963 Q1/1969 Q1/1975 Q1/1981 Q1/1987 Q1/1993 Q1/1999
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Table 14.01
Descriptive statistics of business cycles
1963-2002
No. of
completed
cycles
UK
France
Germany
Italy
Japan
USA
4
3
5
5
2
4
Av. cycle length
peak to peak
(quarters)
21.5
28.0
19.0
20.2
46.5
31.3
Maximum
cycle length
(quarters)
Minimum
cycle length
(quarters)
Av. Deviation
from midpoint
(%)
25
38
27
40
73
42
19
14
11
10
20
17
4.2
2.0
3.8
2.2
4.0
3.4
Source: OECD Main Economic Indicators database, authors' calculations.
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Burns-Mitchell Diagrams for Real GDP:
Eight countries, 1963-2002
©EGEA 2006
Fig. 14.02
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.02 (a)
Burns-Mitchell diagrams for real GDP, 1963-2002
1.04
1.06
1.02
1.04
1.00
1.02
0.98
1.00
0.96
0.98
0.94
0.96
0.92
0.94
UK
0.90
0.88
0.90
0.86
0.88
-10
-8
-6
-4
-2
0
2
4
6
France
0.92
8
-10
10
1.06
1.04
1.04
1.02
1.02
1.00
1.00
-8
-6
-4
-2
0
2
4
6
8
10
0.98
0.98
0.96
0.96
0.94
0.94
0.92
0.92
Italy
0.90
0.88
0.88
0.86
0.86
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
Germany
0.90
8
10
-10
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.02 (b)
Burns-Mitchell diagrams for real GDP, 1963-2002
1.02
1.04
1.00
1.02
0.98
1.00
0.96
0.94
0.98
0.92
0.96
0.90
0.94
0.88
Japan
0.86
0.84
0.90
0.82
0.88
-10
-8
-6
-4
-2
0
2
4
6
8
10
-10
1.06
1.06
1.04
1.02
1.04
1.02
1.00
1.00
0.98
0.98
0.96
0.96
US
0.90
-8
-6
-4
-2
0
2
0.94
0.92
0.90
0.94
0.92
Spain
0.92
0.86
6
8
10
Canada
0.88
0.86
0.88
4
0.84
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
-10
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.02 (c)
Overall reference cycle average (8 countries)
1963-2002
1.04
1.00
0.96
0.92
0.88
0.84
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Table 14.02
Business cycle correlations of macroeconomic
variables with output
1968-2002
Consumption Investment
EU
Japan
USA
0.86
0.71
0.88
0.90
0.89
0.95
Government
spending
Exports
Imports
Prices
Inflation
-0.15
-0.03
0.04
0.85
0.47
0.32
0.94
0.64
0.75
-0.45
-0.15
-0.75
0.30
0.18
0.15
* Correlation coefficient of seasonally adjusted and detrended values using the Hodrick-Prescott filter.
Source: OECD Main Economic Indicators database
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03
Leading and Lagging Indicators, 1968-2002
(Eight countries)
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (a)
Changes in inventories
1.2
0.9
0.6
0.3
0.0
-0.3
-0.6
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (b)
Real stock prices
1.15
1.10
1.05
1.00
0.95
0.90
0.85
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (c)
Capacity utilisation rate
1.02
1.00
0.98
0.96
0.94
0.92
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (d)
Real effective exchange rate
1.04
1.03
1.02
1.01
1.00
0.99
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (e)
Standardised unemployment rate
1.4
1.3
1.2
1.1
1.0
0.9
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (f)
Inflation
0.025
0.023
0.021
0.019
0.017
0.015
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (g)
Real money balances
1.08
1.06
1.04
1.02
1.00
0.98
0.96
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (h)
Short-term nominal interest rate
1.2
1.1
1.0
0.9
0.8
0.7
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (i)
Long-term nominal interest rate
1.04
1.00
0.96
0.92
0.88
0.84
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.03 (j)
Differential long- vs. short-term interest rate
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Table 14.03
Variability* of key macro variables over the cycle
1964-2002
GDP
(%)
EU
Japan
USA
0.95
1.18
1.61
Consumption Investment
0.86
0.81
0.80
2.52
2.43
2.68
Government
purchases
Exports
Imports
Prices
(GDP deflator)
0.53
0.71
0.77
2.44
3.28
2.68
3.07
4.44
3.12
0.94
0.65
0.54
*Variability is measured as the stantard deviation of seasonally adjusted and detrended values using the Hodrick-Prescott filter.
Source: OECD Main Economic Indicators and National Accounts databases
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.04
Components of Aggregate Spending, 1968-2002
(Eight Countries)
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.04 (a)
Private final consumption expenditure
1.08
1.06
1.04
1.02
1.00
0.98
0.96
0.94
0.92
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.04 (b)
Investment (gross fixed capital formation)
1.02
1.00
0.98
0.96
0.94
0.92
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.04 (c)
Government final consumption expenditure
1.06
1.04
1.02
1.00
0.98
0.96
0.94
0.92
-10
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.04 (d)
Primary current account/GDP
0.010
0.005
0.000
-10
-0.005
©EGEA 2006
-8
-6
-4
-2
0
2
4
6
8
10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Deterministic cycles
in the multiplier-accelerator model
©EGEA 2006
Fig. 14.05
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.05(a)
Deterministic cycles: dampened variant
Yt = 1.82Yt -1 - 1.02Yt -2
8
6
Output
4
2
0
-2
-4
-6
-8
0
20
40
60
Time
©EGEA 2006
80
100
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.05(b)
Deterministic cycles: explosive variant
Yt = 1.8Yt -1 -Yt -2
20
15
Output
10
5
0
-5
-10
-15
-20
0
20
40
60
Time
©EGEA 2006
80
100
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.05(c)
Deterministic cycles: perpetual variant
Yt = 1.78Yt -1 - 0.98Yt -2
8
6
Output
4
2
0
-2
-4
-6
-8
0
20
40
60
Time
©EGEA 2006
80
100
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Impulse-propagation mechanism
©EGEA 2006
Fig. 14.06
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.06
Impulse-propagation mechanism
Random Shocks
©EGEA 2006
Economic
System
Cycles
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.07
Impulses and propagations: an example
2
1
200 random shocks, et (normal distribution, mean=0, st.dev.=0.3)
0
-1
-2
3
2
Filtered shocks:
1
0
-1
-2
-3
©EGEA 2006
Yt = 1.3Yt-1 –0.4Yt-1+ et
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Propagating mechanism in AS-AD framework
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Left: AS and AD
Right: Just observations


AS

A
A
AD
0
©EGEA 2006
Y -Y
0
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
There is an increase in the rate of money growth


AS
AS
B

A
0
©EGEA 2006
AD
AD
Y -Y
A
AD
0
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Core inflation adjusts and AS shifts upwards


AS
AS
B

A
0
©EGEA 2006
AS
AD
AD
Y -Y
A
AD
0
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Lagged responses of AD to the change in money
growth leads to further shift of AD


C
AS
B

A
0
©EGEA 2006
AS
AS
AD
AD
AD
Y -Y
A
AD
0
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Further upward shift in core inflation and AS


AS
AS
D
AS
C
B

A
0
©EGEA 2006
AS
AD
AD
AD
Y -Y
A
AD
0
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Fall in output from C to D leads to drop in AD´´...


AS
AS
D
AS
C
C
B

A
0
©EGEA 2006
D
AD
AD
AD
Y -Y
AS
B
A
AD
0
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Economy followed a loop in response to change
in rate of growth of the money supply

When  > m, M/P falling so AD
shifts left.
When  < m, 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.
AS
A
AD
0
©EGEA 2006
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Higher inflation and high output case

AS
When  > m´, M/P falling so AD
shifts left.
When  < m´, M/P rising so AD
shifts right.
When output gap is positive,
 > core inflation (AS has a
positive slope), so AS shifts up.
AD
m
When output gap is negative,
 < core inflation, so AS shifts
down.
0
©EGEA 2006
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Higher inflation, low output case

AD
When  > m´, M/P falling so
AD shifts left.
When  < m´, M/P rising so AD
shifts right.
When output gap is positive,
 > core inflation (AS has a
positive slope), so AS shifts up.
m
AS
When output gap is negative,
 < core inflation, so AS shifts
down.
0
©EGEA 2006
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Lower inflation, low output case

When  > m´, M/P falling so AD
shifts left.
When  < m´, 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.
m
AS
AD
0
©EGEA 2006
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.08
Lower inflation, high output case

When  > m´, M/P falling so AD
shifts left.
When  < m´, M/P rising so AD
shifts right.
When output gap is positive,
 > core inflation (AS has a
positive slope), so AS shifts up.
AD
m
AS
When output gap is negative,
 < core inflation, so AS shifts
down.
0
©EGEA 2006
Y -Y
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.09
Demand shock to West Germany (Unification)
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.09
Counterclockwise loop observed in W. Germany
Inflation (%)
5.0
4.0
1992
1993
1991
3.0
2.0
1994
1990
1.0
0.0
-2%
-1%
0%
1%
2%
Output (deviations from trend)
©EGEA 2006
3%
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Oil price shock of 1973-4: Supply shock
©EGEA 2006
Fig. 14.10
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Riding out an adverse supply shock
without an AD response
Inflation
AS´
AS
B
A
AD
0
©EGEA 2006
Output gap
Fig. 14.10(a)
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.10(c)
United Kingdom. Oil price shock 1973-74.
25
1975
Inflation (%)
20
1974
1976
15
1977
10
1973
5
0
-3% -2% -1% 0% 1% 2% 3% 4% 5%
Output (deviations from trend)
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.10(a)
Responding to adverse supply shock
with AD policy (militant anti-inflationist)
AS´
Inflation
AS
C
A
D
AD
AD´
0
©EGEA 2006
Output gap
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.10(b)
Switzerland. Oil price shock 1973-74.
14
Inflation (%)
12
10
1974
8
6
1973
1975
4
2
1976
1977
0
-3% -2% -1%
0%
1%
2%
3%
4%
Output (deviations from trend)
©EGEA 2006
5%
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Variance of GDP decomposed (percent)
Demand
Supply
Money
Total
Canada
France
Germany
54
19
66
34
80
31
12
1
3
100
100
100
Italy
Japan
UK
40
11
32
51
87
64
10
2
4
100
100
100
USA
20
71
8
100
Technical note: One year after shock, 1979:1–1993:4
©EGEA 2006
Source: Gerlach and Smets (1995)
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
The Solow Residual and GDP
Germany, 1961-1993
©EGEA 2006
Fig. 14.11
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.11
W. Germany: Solow residual and GDP growth
Percent per year
8
7
Output
6
Solow residual
5
4
3
2
1
0
-1
-2
1961
©EGEA 2006
1965
1969
1973
1977
1981
1985
1989
1993
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.12
A productivity shock that increases the marginal
products of capital and labour
©EGEA 2006
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.12
When labour supply is inelastic...
...relatively large change in real wage
A´
r
r
Real wage
Real interest rate
LS(inelastic)
A
MPK 
MPK
K1
©EGEA 2006
Capital
stock
w
w
A´
A
MPL
MPL
Labour
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.12
When labour supply is elastic...
...relatively small change in real wage
A´
r
r
Real wage
Real interest rate
...and a large change in
employment!
A
MPK 
MPK
K1
©EGEA 2006
Capital
stock
LS(elastic)
w 
w
A´´
A
MPL
MPL
Labour
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Intertemporal substitution of labour
©EGEA 2006
Fig. 14.13
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.13
Intertemporal substitution of labour

Leisure tomorrow
  w1 L1  l 1
B
A
-w1 1+ r 
w2


w2

L2  l 2
1 r
Current wage
increase...
...(as drawn) leads
to substitution of
less leisure today
for more leisure
tomorrow.
Leisure today
©EGEA 2006

Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Cyclical patterns in the labour market,
G8 countries, 1965-2003
©EGEA 2006
Fig. 14.14
Burda, Wyplosz
MACROECONOMIA: UNA PROSPETTIVA EUROPEA
Fig. 14.14
Cyclical patterns in the G8 labour markets
©EGEA 2006