Foreign and domestic shocks and fluctuations in the finnish economy 1960-1988

ACKNOWLEDGEMENTS 3

1 INTRODUCTION 7

2 THEORETICAL AND EMPIRICAL ANALYSIS OF ECONOMIC FLUCTUATIONS 8
2.1 The Study of Economic Fluctuations 8
2.2 Aim and Limitations of this Study 15

3 METHODOLOGY FOR THE EMPIRICAL ANALYSIS OF ECONOMIC FLUCTUATIONS 16
3.1 Dynamic Macroeconomics: The Frisch - Slutsky Approach 16
3.1.1 Propagation Mechanism and Impulses 16
3.1.2 A Linear Time Series Interpretation of the
Frisch - Slutsky Approach 19
3.2 Dynamic Macroeconometrics: The Sims Approach 22
3.2.1 The Vector Autoregression Approach 22
3.2.2 Decompositions of Variance and Impulse Responses 27
3.2.3 Structural Vector Autoregression Models 30
3.3 Research Strategy of this Study 35

4 A PRELIMINARY DATA ANALYSIS 38
4.1 Choice and Description of the Data 38
4.2 Joint Integration Properties of the Data 40
4.3 Empirical Findings 44
4.3.1 Tests for Integration 44
4.3.2 Tests for Cointegration 52
4.4 Conclusions 62

5 A WOLD CAUSAL CHAIN MODEL 64
5.1 Theoretical Considerations 64
5.2 Empirical Evidence 68
5.2.1 Estimation Results 68
5.2.2 Analysis of Structural Shocks 74
5.2.3 Impulse Responses 78
5.2.4 Decompositions of Variance 83
5.2.5 Analysis of Subperiods 86
5.3 Conclusions 93

6 A BUSINESS CYCLE FLUCTUATION MODEL 95
6.1 A Theoretical Model with High Frequency Restrictions 95
6.2 Empirical Evidence 110
6.2.1 Estimation Results 110
6.2.2 Analysis of Structural Shocks 121
6.2.3 long-run Impact of Structural Shocks 128
6.2.4 Analysis of Subperiods 136
6.3 Conclusions 142

7 A SECULAR FLUCTUATION MODEL 143
7.1 An Empirical Model with Low Frequency Restrictions 143
7.2 Empirical Evidence 149
7.2.1 Estimation Results 149
7.2.2 Impulse Responses 153
7.2.3 Decompositions of Variance 161
7.2.4 Analysis of Subperiods 163
7.3 Conclusions 181

8 SUMMARY AND CONCLUDING REMARKS 183
LIST OF SYMBOLS 187
LIST OF FIGURES 189
LIST OF TABLES 191
LIST OF APPENDICES 195
APPENDICES 196
REFERENCES 218