This paper uses the macro-econometric models of the European System of Central Banks to simulate a measure of the extent to which the sources of business cycle of France, Germany and Italy can be traced down to common and/or idiosyncratic factors and to investigate the propagation mechanism of these factors through the various components of aggregate demand. The paper computes responses of GDP and components to hypothetical cyclical shocks that may perturb some of the exogenous factors driving the three economies. Moreover, it shows with couterfactual simulations that over the 1998Q4–2003Q4 period: a) the cycle of world demand could account for up to 35% of the French GDP cycle, 23% of the German and 17% of the Italian; b) the cycle in the Euro exchange rate could account for a large fraction of the German GDP cycle, but only a small fraction of the French and the Italian; and c) taking French government consumption as a benchmark -because the most countercyclical- the deviation of government consumption growth with respect to the benchmark could only account for up to 8% of the Italian GDP cycle and only up to 7% of the German.
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- Synchronization of Responses to Cyclical Demand Shocks in France, Germany and Italy: Evidence from Central Banks Macro-models
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