International Evidence on Output Fluctuation and Shock Persistence

Abstract

We estimate output growth rate spectra for 58 countries. The spectra exhibit diverse shapes. To study the sources of this diversity, we estimate the short-run, business cycle, and long-run frequency components of the sampled series. For most OECD countries the bulk of the spectral mass is in the business cycle frequency band, and the magnitude of this cyclical component increases with income. For the developing countries, however, the spectral mass is not concentrated in the business cycle frequency band, and the income-cycle relationship is not as strong. We also estimate two frequency domain measures of shock persistence and find both measures to vary considerably across countries, with the U.S. having the lowest estimates. For the OECD countries most of the variation in the variance ratio statistic appears to be explained by the variation in the long-term growth component.

Keywords: Output Fluctuation, Shock Persistence, Spectral Analysis, Frequency Domain, Short Run, Business Cycle, Long Run, Cyclical Component, OECD, Developed Countries, Developing Countries, Frequency Domain Measures of Shock Persistence, Income-Cycle Relationship, Spectral Mass

JEL Classification: C32, E30, E32, O40, O57