Germany before and after unification: A structural VAR analysis |
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Authors: | Axel A. Weber |
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Affiliation: | aUniversität Bonn, Rechts- und Staatswissenschaftliche Fakultät, Innsitut fur Wirtschaftstheorie II, Lennestrasse 43, 53113 Bonn, Germany;bCEPR, 25-28 Old Burlington Street, London WIX ILB, UK |
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Abstract: | Recent theoretical research in business cycle modelling has aimed at putting forward a unified framework for studying both short-term cycles and long-term growth. Empirical research based on structural vector-autoregression has established that the same factors which drive long-run growth also explain a large proportion of the movements of key macro variables at business cycle frequencies. The present paper aims at applying this approach to study the determinants of the post-unification downturn in Germany. The results suggest that German business cycles were not all alike. Whilst adverse supply shocks clearly matter before unification, it is primarily adverse aggregate demand shocks and a too tight monetary policy which dominate the German post-unification decline in output growth rates. |
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Keywords: | Business cycles Growth Structural vector autoregression Shocks Propagation |
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