Business Cycles Fluctuations in Europe (1960-1998)

Abstract

The goal of the paper consists in investigating if comovements in some selected time series are common to various countries and periods of time. To do so, we use 18 economic time series (GDP and demand components, employment and wages, money and prices, interest rates and stock prices) between 1960: I - 1998: IV for 17 European countries. We found regularity in terms of comovements and periodicity with respect to the GDP, in slightly most of the series. In particular, consumption and investment among the aggregate demand components, employment and productivity, and, to a lesser degree, the consumers' and GDP price indexes, their inflation rates and the stock market index, are stable across countries, while the exogenous component of the national income series, the monetary variables, the interest rates and the nominal wage level are not. Cyclical movements of some series certainly are policy and institutional specific, as previous studies argued. Moreover, we investigated if GDP-comovements are roboust within each single country, by comparing the various cyclical phases. As regards the cycle-specific approach, we found that only the real series are stable: prices, interest rates and wages are very irregular. Since our finding shows that prices, interest rates and the costs of the factors behave not uniformly, a most cautious approach to the analysis of the business cycle should be taken. Our results puzzle the one-sided impulse-propagation approach to fluctuations. The main message which emerges from this paper is that business cycles are not all alike, but some characteristics are very roboust.