DP5878 The Structural Dynamics of Output Growth and Inflation: Some International Evidence

Author(s): Fabio Canova, Luca Gambetti, Evi Pappa
Publication Date: October 2006
Keyword(s): persistence, structural time varying VARs, transmission, variability
JEL(s): C11, E12, E32, E62
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5878

We examine the dynamics of output growth and inflation in the US, Euro area and UK using a structural time varying coefficient VAR. There are important similarities in structural inflation dynamics across countries; output growth dynamics differ. Swings in the magnitude of inflation and output growth volatilities and persistences are accounted for by a combination of three structural shocks. Changes over time in the structure of the economy are limited and permanent variations largely absent. Changes in the volatilities of structural shocks matter.