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Business Cycle Transmission from the US to Germany: a Structural Factor Approach

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  • Eickmeier, Sandra
Abstract
This paper investigates the transmission of US macroeconomic shocks to Germany by employing a large-dimensional structural dynamic factor model. This framework allows us to investigate many transmission channels simultaneously, including 'new' channels like stock markets, foreign direct investment, bank lending and the confidence channel. We find that US shocks affect the US and Germany largely symmetrically. Trade and monetary policy reactions to strong price effects seem to be most relevant; financial markets may have become more important over time. The speed of transmission does not seem to have increased. Negative domestic influences apparently more than compensated positive US influences in the German economy between 1995 and 2000, but the US recession in 2001 seemed mainly responsible for the German slump.

Suggested Citation

  • Eickmeier, Sandra, 2004. "Business Cycle Transmission from the US to Germany: a Structural Factor Approach," Discussion Paper Series 1: Economic Studies 2004,12, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:2021
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    More about this item

    Keywords

    International business cycles; international transmission channels; dynamic factor models; structural VAR techniques;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F02 - International Economics - - General - - - International Economic Order and Integration

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