Working Papers, Konjunkturinstitutet - National Institute of Economic Research
Growth and Business Cycles for the Swedish Economy 1963-1999
Abstract: This paper consists of two parts. In the first part we
carry out a traditional growth accounting exercise for the private business
sectors of the Swedish economy. We search for structural breaks during the
sample period, using Chow tests, using a dynamic specification of Total
Factor Productivity (TFP) growth rates. Granger-causality tests are carried
out for the nine sub-sectors of the private business sectors of the Swedish
economy. We combine the growth rates of value added and hours worked and
calculate labour productivity for the period 1960-1999. In order to
facilitate comparisons we compare the results of this study with Swedish
and international studies. To a large extent we are able to replicate the
Swedish results. The slow down in TFP growth rates in the 1970s can be
identified with the first and the second oil shocks in 1973 and 1979. The
other structural breaks occurred in the early 1990s and could possibly be
identified with the Tax Reform of the Century in 1991 and the severest of
recession in the Swedish economy. The Granger-causality test indicate that
growth rates in investment Granger cause growth rates in TFP for
Agriculture and financial institutions, real estate and other business,
while TFP growth rates in mining and quarrying, and manufacturing Granger
cause growth rates in investment.
The second part of the paper I
Hodrick-Prescott filter the data, and calculate cross correlation’s of
detrended output, hours, investment and TFP at different leads and lags.
The results indicate that investment leads TFP for agriculture, hunting,
forestry and fishing, electricity gas and water, and for education, health
and social work and community social and personal services. Investment lags
TFP for the mining and quarrying, manufacturing industry, and for financial
institutions and insurance companies, real estate renting and business
service companies. Hours worked lead the TFP cycle for mining and
quarrying, manufacturing and wholesale/retail trade. The decomposition of
TFP into trend and cyclical component historical dates the business cycle.
Standard deviations of the cyclical components of value added, hours
worked, TFP, and gross investment reveals that the most volatile variables
are gross investment, followed by TFP, GDP and hours worked.
contribution of this part of the paper lies in the disaggregated data set
containing annual information for the period 1963-1999, and in the
application of several analytical tools to the growth accounting exercise
results. In addition such an extensive growth accounting exercise has not
been carried out for the private business sectors of the Swedish economy.
The data set used in this study can be used for replication purposes.
Keywords: growth accounting; labour productivity; total factor productivity; growth dynamics; Granger- causality; recursive Chow tests; cross correlations; Hodrick-Prescott filtering; leads and lags; new economy; (follow links to similar papers)
51 pages, June 1, 2002
This paper is published in Journal of Construction, Vol.3, No.2 (2002), 217-253.
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