Research Discussion Papers, Bank of Finland
No 3/1998:
The Sources of Output Shocks in Finland and Other EU Countries
Helvi Kinnunen ()
Abstract: This paper examines the sources of output shocks in
Finland as compared to other EU countries. The data consists of output
fluctuations in main industries in nine current EU countries for the period
1978–1993. The sources of output shock are considered to consist of
country-specific factors, sector-specific factors and a time factor, which
is common to all countries and sectors. Fluctuation is partitioned using
three-dimensional analysis of variance. Output shocks in Finland are
clearly more country-specific than in other EU countries. A separate
examination of the time period preceding the 1990s demonstrates that the
result is not due to the exceptional recession in the beginning of the
1990s. The more central role that the country-specific factor has in
Finland as compared to other EU countries is explained by the fact that
average output growth was higher in Finland than in other EU countries
until the end of the 1980s. Differences in growth rates between sectors
also were larger than in other countries. Examination of the time period
including the recession revealed that idiosyncratic economic cycle was
clearly a more significant source of disturbances in Finland than in other
countries. Examining the time period covering the depression also
underlines the large volatility of the sheltered sector in Finland.
Keywords: output shocks; output by industry; variance partitioning; EU countries; (follow links to similar papers)
26 pages, March 26, 1998
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