Econometric Business Cycle Research by Jan Jacobs (auth.)

By Jan Jacobs (auth.)

Econometric enterprise Cycle Research offers with econometric enterprise cycle examine (EBCR), a time period brought by way of the Nobel-laureate Jan Tinbergen for his econometric approach to trying out (economic) company cycle theories. EBCR combines fiscal concept and size within the research of industrial cycles, i.e., ups and downs in total fiscal task. We determine 4 equipment of EBCR: company cycle signs, simultaneous equations versions, vector autoregressive structures and actual company signs. After a cartoon of the background of the equipment, we examine no matter if the equipment meet the objectives of EBCR: the 3 conventional ones, description, forecasting and coverage overview, and the only Tinbergen brought, the implementation|testing of industrial cycles. the 1st 3 EBCR tools are illustrated for the Netherlands, a regular instance of a small, open financial system.
the most end of the e-book is that simultaneous equation versions are the simplest automobile for EBCR, if all its pursuits are to be attained at the same time. This end relies on a pretty precise evaluation of the tools and isn't over-turned within the empirical illustrations. the most end doesn't suggest the top of different EBCR equipment. now not all ambitions need to be met with a unmarried car, different tools may perhaps serve the aim both good - or maybe greater. for instance, if one is drawn to enterprise cycle forecasts, one may well desire a enterprise cycle indicator or vector autoregressive approach.
A moment end is that many ideas/concepts that play an enormous function in present discussions approximately econometric technique regularly and EBCR specifically, have been recommend within the Thirties and Nineteen Forties.
a 3rd end is that it truly is tricky, if now not very unlikely, to match the results of RBC types to results of the opposite 3 equipment, simply because RBC modellers are usually not attracted to modelling enterprise cycles on an observation-per-observation foundation. A extra common end during this admire is that tools may still undertake an identical notion of commercial cycles to lead them to comparable.

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The VAR approach starts with the selection of the variables, which might be influenced by theoretical priors. The next step is the determination of the lag lengths-or order-of the variables by means of statistical tests based on some information criterion. The number of parameters may easily get out of hand, because one additional lag in a VAR system with, say K variables, increases the number of parameters with a factor K2. Statistical techniques may help to reduce the number of parameters without loss of information, see Liitkepohl (1991).

Sims recommends 'to focus attention on policy changes that are not too dramatic, which can reasonably be modeled as sequences of random disturbances to the policy behavior that is explicit in the model' {Bernanke et al. 145-146}. As Kuipers {1990} notes, we can be more specific about the consequences of the Lucas critique if we use Tinbergen's {1967} distinction between quantitative policy and qualitative policy/economic reforms. , policy measures referring to changes in the values of existing policy instruments, which are to a large extent of a routine character and do not change the stochastic environment in which individuals have to take their decisions.

Step 4. If the null is not rejected, we test for the significance of the constant term under the null using

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