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# Business Cycle: Theory And Empirical Applications Country Of Interest: Netherlands

3372 words - 14 pages

University of Frankfurt am Main

Bachelor Seminar Business Cycle: Theory and Empirical Applications Country of interest: Netherlands Teacher: Prof. Ctirad Slavik Summer Semester 2013

Yisong Dong Student ID: 3903447 June 17.2013

Contents 1. Introduction……………………………………………………………………3 2. Data Work………………………...…………………………………………...3 2.1 2.2 2.3 2.4 2.5 Data……………………………………………………………………3 Detrending the data with Hodrick-Prescott Filter………………..……4 Basic Statistics for the detrended data………………………………...7 Construct the Solow residual without labor……………………...…..11 Construct the Solow residual with labor…………….………………12

3. Calibrating and simulating a simple stochastic RBC model…………………13 3.1 3.2 Two ...view middle of the document...

In the first part I will use the HodrickPrescott filter to detrend the data and analyze the performance with standard deviations and correlations with output and autocorrelations. In the second part I will calibrate and simulate a simple stochastic Real Business Cycle model. In the third part of this paper I will discuss the successes and failures and perform my conclusions.

2.

Data Work 2.1 Data

The data I have used for this paper were from the International statistical yearbook (ISY) and OECD Economic Outlook No.90. The series are from 1968 to 2012, which is a total of 45 observations. The data from ISY and OECD Economic Outlook No.90 are highly identical. Because I didn’t find enough useful data for Capital from ISY, I

1

A. F. Burns and W. C. Mitchell, Measuring business cycles, New York, National Bureau of Economic Research, 1946. 2 GDP=gross domestic product. 3 Madhani, P. M. (2010). Rebalancing Fixed and Variable Pay in a Sales Organization: A Business Cycle Perspective. Compensation & Benefits Review, 42(3), pp. 179-189.

3

use the data from OECD NO,90. The data are annual adjusted. All values are presented in Euro. I use Eviews, Gretl and Excel to finish all the work To finish this paper I need data for the following five variables: Output(Y): Gross domestic product, volume, market prices in MN Euro Cnt Netherlands Labor (N): Total employment Cnt Netherlands Investment (I): Gross fixed capital formation, total, volume in MN Euro Cnt Netherlands Consumption(C): Private final consumption expenditure, volume in MN Euro Cnt Netherlands Capital (K): Oecd Economic Outlook No. 90

2.2 Detrending the data with Hodrick-Prescott Filter I first take logs of all the original data and then use the Hodrick-Prescott Filter with a smooth parameter equal to 100 for analyzing it. The following graphs show the detrended time series data for the relevant variables:

Figure 1: Output

4

Figure 2: Labor

Figure 3: Investment

Figure 4: consumption

5

Figure 5: capital

Figure 6: All the variables

The graphs of the time series show us that there is a fluctuation in past and recent years. Therefore we can draw some conclusions: 1. There was a recession between 1973 and 1983. It can be explained by the first

oil crisis and energy crisis in 1979. After that almost all the variables started to decrease till 1983. 2. 3. Another recession happens between 2001 and 2005.I think the reason is the Because of the financial crisis which happened at the end of 2007, we can internet bubble and 9-11 and. They cause a decline in GDP. observe a deep drop of GDP and investment. At...

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