E32 - Business Fluctuations; CyclesReturn

This study investigates the macroeconomic resilience of the Moroccan economy using a comprehensive analysis of key indicators and policy variables. Utilising data from sources such as the World Bank, we examined GDP per capita, government debt, government final expenditure, agriculture and industry sectors as a percentage of GDP, output gap, and trade openness. Applying the Autoregressive Distributed Lag (ARDL) method, we established both long-run and short-run relationships between these variables and the output gap, which represents the cyclical trend in the economy. Our findings revealed that both government final consumption in % of GDP and government debt in % of GDP have a significant impact on the economy as they were found to be countercyclical measures, mitigating the adverse effects of shocks on the economy. The ARDL model's diagnostic tests confirmed the validity of our estimations, ensuring robust and reliable results. Overall, this study sheds light on the budgetary determinants of macroeconomic resilience in the Moroccan economy and provides valuable insights for policymakers to implement measures that promote stability and sustainability. By carefully managing government expenditure and debt levels, the Moroccan economy can better navigate economic shocks and foster a more resilient and prosperous future.

This paper uses symmetric and asymmetric testing procedures to examine the issue of the relationship between the output gap and inflation for the Turkish economy using data from 2002:01 to 2021:09. First, it analyses the cointegration by applying different cointegration tests taking into account structural breaks and asymmetric behaviour to reveal whether the relation varies between sub-periods. Afterwards, it examines the asymmetric causality between different shocks. Our empirical results indicate that there is a long-run relationship between series in the existence of two structural breaks and asymmetry. The results also show asymmetric causality running from positive (negative) output gap to positive (negative) inflation shock, and running from negative inflation shock to negative output gap shock. The overall findings indicate the importance of having in mind the structural breaks and asymmetric behaviour of macroeconomic variables in policy-making processes, such as in Turkey during high and volatile inflation.

This study revisits the empirical relationship between output volatility and output for twelve OECD countries. An extended AR-EGARCH-M model was used to identify the structural break, asymmetric effect, jump effect and spillover effect. In addition to the classical logarithmic definition of growth, the study uses the Hodrick-Prescott filter to compute the deviations from the long-term trend as the output gap. The empirical results show that (i) the effect of output volatility on output differs across countries under the same model specifications; and (ii) while the in-mean effect and spillover effect are stronger for the output gap-based models, the jump effect has a major effect on output volatility under the classical logarithmic definition.

Fiscal policy is an effective instrument in helping governments in developed countries overcome a recession with a high unemployment rate or a hot economy with a high inflation rate to keep the economy on a stable path. Does governance contribute significantly to keeping this goal in these countries? The study looks for an answer by empirically investigating the role of governance in the output gap - fiscal policy relationship for a group of 27 developed countries between 2002 and 2019. It employs the difference GMM Arellano-Bond estimators and the PMG estimator for estimation and robustness check. The results provide some interesting findings. Firstly, both public spending and government revenue are counter-cyclical, confirming the counter-cyclical fiscal policy in developed countries. Secondly, governance hinders the counter-cyclical fiscal policy. The findings imply some crucial policies for governments in developed countries in running the fiscal policy.

Although the use of residential real estate macroprudential tools has become common in recent years, rigorous approaches to their calibration have been relatively scarce. The goal of this paper is to present an approach to (i) evaluating direct risks to financial stability related to residential real estate exposures, and to (ii) calibrating borrower-based macroprudential measures. First we present a macroprudential indicator of potential losses related to the provision of new mortgage loans. Then we show how to determine risky values of the loan-to-value, loan-to-income and loan service-to-income ratios by per-forming stress tests on the individual new mortgage loans. Finally, we demonstrate the applicability of this approach on the case of the Czech Republic. We conclude by show-ing that simultaneous adoption of several macroprudential measures may enhance their efficiency without imposing higher restrictions on the mortgage market.

This paper presents a theoretical model that is suitable for the analysis of price-setting hetero-geneity in a small open economy. The model is based on Benigno and López-Salido's (2006) work and is one of many examples of a dynamic stochastic general equilibrium (DSGE) model that utilizes heterogeneous price stickiness (e.g., Aoki, 2001; Bodenstein et al., 2008). The model allows analyses of a small open economy by extending the existing multisector models using the mechanisms described by Galí and Monacelli (2005). As a result, the model enables monetary policy analyses that take into account existing sectoral differences in the price-setting mechanisms found in an open economy. In the empirical part of the paper, the model is estimated on data for Poland using Bayesian techniques. The results show that the period 1999-2017 saw significant differences in price stickiness and inflation persistence in the sectors that produce food and energy compared with sectors that produce other goods and services.

Global economic policy uncertainty (GEPU) is one of important phenomena in the global economy; it can impact on the overall economic performance and stock market per-formance, regardless of the status of the world economy. Thus, this paper empirically investigates the impact of global economic policy uncertainty on the Malaysian stock market over the period from 10:2003 to 2017:03. Using the GARCH model, the study demonstrates that global policy uncertainty affects the Malaysian stock market negatively. Similarly, the SVAR model also shows results consistent with the GARCH estimation. Nevertheless, the Markov switching estimation uncovers that global policy uncertainty has negative impacts on stock market performance in both low and high volatile market states. The impact is, however, greater during the high volatile state. Hence, the relationship between global economic policy uncertainty and stock market returns tends to be asymmetric. The overall empirical results infer that global economic policy uncertainty has some implications for asset pricing.

This paper analyses the unemployment hysteresis in the Czech Republic on data from 1999 to 2016. The hysteresis is modelled by allowing for the impact of cyclical unemployment on the non-accelerating inflation rate of unemployment. Models are estimated using the Bayesian approach and provide robust evidence in favour of the hysteresis. The estimates imply that in response to an increase in the cyclical unemployment of 1 percentage point, the non-accelerating inflation rate of unemployment increases by 0.18 percentage points.

The relationship between economic growth and unemployment is well known. The growth of gross domestic product leads to a fall in unemployment and, reversely, its fall is associated with a rise in unemployment. The paper deals with the estimation of Okun's coefficient for EU28 countries between years 2001 and 2014. Additionally, two sub-periods are also analysed. These represent the pre-crisis period 2001-2007 and the post-crisis period 2008-2014. The result shows higher Okun's coefficient in the post-crisis period. Unemployment in that period responded to changes in gross domestic product more sensitively than in the pre-crisis period. As a result, in order to decrease unemployment, lower economic growth was necessary in the post-crisis period compared to the pre-crisis one.

This study investigates the sensitivity of Consumer Price Index (CPI) sub-items to output gap for an emerging market economy, Turkey. To this aim, we estimate standard Phillips Curve equations for each of the 152 sub-indices of the CPI and determine the goods and services that respond to output gap in a statistically and economically significant manner. Thereby, we propose an alternative view to assess core inflation as a complementary tool to better monitor underlying inflation with respect to its main drivers. Empirical findings show that about one-third of the consumer basket is affected by the output gap. Remaining items that are found to be insensitive to business cycle extensively co-move with import prices and exchange rate. The results imply that controlling inflation through counter-cyclical policies may be a more challenging issue, especially when external factors work in the opposite direction. Policy efforts to reduce exchange rate volatility and import content of aggregate production are as important as cyclical policies geared toward steering the economy with respect to its potential.

This article identifies structural changes in the Czech economy in the period from 1996 to 2012 using a DSGE model estimated using Bayesian methods. A structural change is understood as a statistically significant change in model parameter(s). Prior to the first quarter of 1999, there was a structural change that can be primarily attributed to shocks impacting only the domestic economy, and to the domestic monetary authority's increased preferences towards inflation and exchange rate growth. The elasticity of substitution between domestic and imported consumption goods also increased sharply in this period. As far as the recent economic recession is concerned, it was caused by a much more persistent worldwide technology shock. Habit formation dropped abruptly during the crisis as households tended not to smooth their consumption much anymore. Recursive impulse response analysis carried out on the model suggests that the propagation mechanisms in the model economy changed, implying that the identified structural changes were accompanied by a change in behaviour of the model economy.

Recent financial crisis has brought to attention the issues of interactions between financial markets and real economy. This paper presents an analysis of the possible explicit effects of various measures of financial markets' risk on real economy based on impulse - response functions within structural vector autoregressive models. As discussed in the paper the riskiness of financial markets is closely related to the more traditional mechanisms based on financial accelerator approach, however, although the issue of financial risk is closely tied with the financial accelerator model, broader effects outside this model may be considered as well. The analysis is carried out for the Czech Republic. The estimates of the responses in the impulse-response analyses typically correspond with the hypothesized effects of the financial risk factors on the real variables; also the interrelations between some of the financial risk factors are obvious. We conclude that increased financial risk seems to be an amplifying element rather than the key driver in the interactions between financial and real economy.

We compare three filters commonly used for business cycle analysis: the Baxter-King, the Christiano-Fitzgerald and the Hamming window filter. Empirical contribution of the paper is numerical evaluation of the approximation of the ideal band-pass filters in the discussion of the filters' theoretical properties (gain and attenuation within the business cycle frequencies, as well as the leakage in the remaining frequencies). We consider the truncation factor for the BaxterKing filter and the sample size for the latter two. We show that the leakage and attenuation of the Christiano-Fitzgerald and the Hamming window filter perform similarly across the range of chosen sample sizes and better than the Baxter-King filter. Moreover, we apply the filters to data of selected EU countries and point out differences in their estimation of growth business cycles. Our findings indicate that Christiano-Fitzgerald filter and the Hamming window both are appropriate for the identification of a business cycle. The Hamming window filter introduces smaller attenuation near the edges but in case of small samples its approximation of ideal filter is very rough.

The influence of foreign banks on a host country's lending depends on several factors, including the policy of the parent bank, the strategy of entry, economic cycles in the home country and abroad, growth prospects, the indebtedness of commitments and the capital adequacy of the parent bank. During the most recent economic crisis, the credit supply of foreign banks in the 10 new European Union (EU) Member States has not remained stable in the crisis. More specifically, we find evidence that foreign banks have cut the credit supply slightly in the new EU Member States.

We focus on changes in dynamic correlation during the recent financial crisis. The results show different responses to this symmetric shock in V4 countries. We discuss possible specialization if the dynamic correlation increases only at certain of the frequencies. Especially, in case of the Czech Republic where the variability of dynamic correlation in business cycle frequencies increased in relation to the euro area, whereas decreased in relation to Germany. Consequently, we point out to the limitations of a correlation and concordance index as common indicators of business cycle synchronization in time domain.

In this article we analyse a neoclassical model of inflation. Our aim is to reconstruct the neoclassical theory of inflation to obtain a model which generates non-periodical oscillations of price level. This model is considered to be a realistic approximation of actual price level evolution. We start our analysis with the Fisherian equation of exchange. The assumption on non-variability of the velocity of money circulation parameter is relaxed in favour of dependence on expected inflation. The resulting model of inflation is a two-equation model where price evolution depends on production dynamics which is assumed to be an exogenous variable. After that, the two-equation model is re-formulated as an autonomous system to a model where production dynamics is determined by a Kaldorian type's model. By adding Kaldor's model to the two equation system, we create a four equation model. Both our models are able to generate more complex dynamics, i.e. non-linear cycles and chaos, which we examine by generating time series from numerical example and analyse them with the help of an advanced non-linear method.

We propose a new quantitative recession magnitude scale for measuring recessions' magnitudes ('strength') derived from GDP growth rates during a recession and its duration. Furthermore, we introduce a qualitative scale with four recession categories: minor, major, severe and ultra, where the categories are defined by the magnitude scale. We use both scales to evaluate several well known economic recessions of the 20th and the 21st centuries. We have found that the Great Depression in 1929-1933 and recessions in Russia and Ukraine in the 1990s belong to ultra recessions, while the recent 2007-2009 financial crisis falls mainly into major (EU and Japan) and severe (USA) category.

The paper provides the methodological background for the Czech Republic business cycle dating process using an alternative approach. This approach is based on the mathematical principle of identification of extremes using estimates of derivations of time trend of the analysed time series, for which the nonparametric Gasser-Müller estimate is used. The presented methodological approach is applied on the real gross domestic product data sets, the total industry (excluding construction), the gross capital formation and the final consumption expenditure. The selected variables are taken from the national accounts system. The obtained results are compared to the widely used naive technique of business cycle dating written by Canova (1998, 1999) or Bonenkamp (2001). The presented new method specifies the identification of turning points in the business cycle dating process.

In this paper I use an open economy DSGE model and estimate it for Romanian economy using Bayesian techniques. Based on estimation I derive a smoothed estimation of the output gap. I compare the results with those from standard procedures to estimate the output gap, the Hodrick Prescott ilter, the production function and an unobserved components model. The results show that the DSGE approach can give a better picture of the output gap and it is more consistent with the dynamics of Romanian economy.

This paper introduces a model for stress testing of probability of default of individuals. The model rests on assumption that the individual defaults if his savings fall below zero. The probability of default is then described as a function of several macroeconomic indicators, such as wages, unemployment and interest rates. Stress testing is carried out by applying exogenous stress scenarios for development of these indicators. The model implies that sensitivity of probability of default to the stress is mainly driven by installment to income ratio and for mortgages also by loan maturity. Hence installment to income ratio is suggested as the appropriate tool to manage credit risk of retail portfolios.

This paper studies whether the dynamic behaviour of real GDP, unemployment and inflation is systematically affected by the timing of elections and by changes of government in the Czech Republic. Two basic models of political cycles are tested - political business cycle models and partisan theories. Political business cycle models emphasize the opportunistic behaviour of incumbents who strive to get re-elected regardless of party affiliation. On the other hand, partisan politicians are faithful to their ideological opinions and therefore attract a specific constituency. The tests partly support the opportunistic motives for the behaviour of Czech politicians. On the contrary, suppositions of partisan motives were not proved.

The paper examines the cross-country relations between nominal money and real output between 1990 and 2000. Both high money growth rates and declines in money are connected with below-average output growth rates. The association between the monetary base and real output is weaker than between M1 (or M2) and real output. I observe no tendency of money changes to precede output changes.