Puzzling Global Stochastic Trends in Growth, Interest and Inflation and the Volcker Disinflation

Heinlein, Reinhold; Krolzig, Hans Martin

Abstract

© 2016 The University of Manchester and John Wiley & Sons Ltd This paper aims to identify the stable long-run relationships as well as unstable driving forces of the world economy using a small aggregated cointegrated VAR model encompassing quarterly US, UK, Japanese and Euro Area data for the post-Bretton-Woods era. Three stable long-run relationships are found: output growth, the term spread and the inflation climate. The common stochastic trend of the global macro economy is dominated by the cumulated real short-term interest rate shocks, reflecting the strong increase of global real rates during the Volcker disinflation period, one of the dominating events of the last 40 years of macro history.

Citation

Heinlein, R., & Krolzig, H. M. (2018). Puzzling Global Stochastic Trends in Growth, Interest and Inflation and the Volcker Disinflation. Manchester School, 86(2), 178-194. https://doi.org/10.1111/manc.12175

• Journal Article Type: Article
• Acceptance Date: Sep 7, 2016
• Online Publication Date: Nov 3, 2016
• Publication Date: Mar 1, 2018
• Deposit Date: Sep 18, 2019
• Publicly Available Date: Sep 19, 2019
• Journal: Manchester School
• Print ISSN: 1463-6786
• Electronic ISSN: 1467-9957
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 86
• Issue: 2
• Pages: 178-194
• DOI: https://doi.org/10.1111/manc.12175
• Public URL: https://uwe-repository.worktribe.com/output/2718287