Munich Personal RePEc Archive

The effect of real shocks on business cycle fluctuations. A Bayesian panel vector autoregressive approach

Kenny S, Victoria (2019): The effect of real shocks on business cycle fluctuations. A Bayesian panel vector autoregressive approach.

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Abstract

In recent times, the behaviour of the economy in terms of growth and fluctuations represent two of the main concern for economist and policy makers. These described the interaction between growth and cycles which are regarded as business cycle. This study examines the effects of real shocks on business cycle fluctuations in Africa covering periods from 1981-2015. The results of this findings show that exogenous real shocks are sources of business cycle fluctuations in Africa using the Bayesian panel vector autoregressive approach. It is observed that commodity prices and government spending lead to a negative impact on real output and other macroeconomic variables considered in the study, while terms of trade had a positive impact. The variance decomposition highlights the relative importance of government spending across African countries as it accounts for the largest variations in Real GDP.

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