Euro area business cycle dating
Over the period since the Industrial Revolution, technological progress has had a much larger effect on the economy than any fluctuations in credit or debt, the primary exception being the Great Depression, which caused a multi-year steep economic decline.The effect of technological progress can be seen by the purchasing power of an average hour's work, which has grown from in 1900 to in 1990, measured in 2010 dollars.There were frequent crises in Europe and America in the 19th and first half of the 20th century, specifically the period 1815–1939.This period started from the end of the Napoleonic wars in 1815, which was immediately followed by the Post-Napoleonic depression in the United Kingdom (1815–30), and culminated in the Great Depression of 1929–39, which led into World War II.There were similar increases in real wages during the 19th century.(See: Productivity improving technologies (historical).) A table of innovations and long cycles can be seen at: Kondratiev wave § Modern modifications of Kondratiev theory.Despite the often-applied term cycles, these fluctuations in economic activity do not exhibit uniform or predictable periodicity.The common or popular usage boom-and-bust cycle refers to fluctuations in which the expansion is rapid and the contraction severe.
Periodic crises in capitalism formed the basis of the theory of Karl Marx, who further claimed that these crises were increasing in severity and, on the basis of which, he predicted a communist revolution.While most papers dealing with business cycle dates rely on one specific method, I present and discuss a number of different dating approaches based on the classical business cycle.These are applied to German GDP data comprising 1970–2006.Finally, based on the results of the different methods, a consensus business cycle chronology for the German economy is suggested.I gratefully acknowledge comments and suggestions from Klaus Wälde and two anonymous referees.I also benefited from comments by Klaus-Jürgen Gern and the participants of a workshop in Dresden and a seminar in Würzburg.In this paper, we analyze macro-financial linkages in the euro area by implementing an innovative factor-augmented probit model estimated using a large database.See Financial crisis: 19th century for listing and details.The first of these crises not associated with a war was the Panic of 1825.In particular, our model specification enables the identification of the leading influence of financial variables on euro area business cycles, in addition to the coincident information conveyed by standard macroeconomic variables.We also point out that dynamic factor models lead to more accurate replication of business cycles than static ones.► We analyze macro-financial linkages in the euro area.