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Transcript of WEM_June
![Page 1: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/1.jpg)
Dun & Bradstreet’s Regional View Europe
June 2015
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Contents1. Contribution to growth and real GDP growth forecast
2. A BIG MACronomic approach to the evolution of households’ purchasing power
3. Is sluggish labour productivity to blame?
4. A Hodrick-Prescott approach to the relation between Unemployment Cycle and Business Cycle
5. Inflation and Inflation forecast: are cycles getting longer?
6. Financial Markets’ jitteriness: A Multivariate-GARCH approach to volatility
Follow us on Twitter @DnBEconomy | #DnBEconBrief
![Page 3: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/3.jpg)
1. Contribution to growth and real GDP growth forecast
![Page 4: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/4.jpg)
4Follow us on Twitter @DnBEconomy | #DnBEconBrief
![Page 5: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/5.jpg)
2. A BIG MACronomic approach to the evolution of households’
purchasing power
![Page 6: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/6.jpg)
6Follow us on Twitter @DnBEconomy | #DnBEconBrief
![Page 7: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/7.jpg)
3. Is sluggish labour productivity to blame?
![Page 8: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/8.jpg)
8Follow us on Twitter @DnBEconomy | #DnBEconBrief
A Markov Switching Model approach to labour productivity
• Under the Markov Switching (MS) approach, the observed variable is assumed to switch regimes according to some unobserved variable
• Movements of the state variable between regimes are driven by a Markov process
• Why MS is so popular? Because the probability distribution of the state at any time t depends only on the state at time t-1, and not on the states at times t-2, t-3, etc…In other words, Markov processes are not path-dependent
• If a variable follows a Markov process, all that is required to forecast the probability that it will be in a given regime during the next period is the current period’s probability and a matrix of (time-varying) transition probabilities, the transition probabilities being the probability for the state variable to move from regime i to regime j
• Here, the two regimes are ‘fast growth’ and ‘slow growth’.
• Running a MS regression, I’ve compute the time-varying probabilities for the economy to move from a fast-growth mode to a slow-growth mode.
• The interesting (albeit not surprising) finding is that (on average) the probability of moving from fast to slow growth (hence, a deceleration of the GDP growth rate) is higher when labour productivity is lower.
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9Follow us on Twitter @DnBEconomy | #DnBEconBrief
Spain Italy
Greece Ireland
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4. A Hodrick-Prescott approach to the relation between
Unemployment Cycle and Business Cycle
![Page 11: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/11.jpg)
11Follow us on Twitter @DnBEconomy | #DnBEconBrief
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12Follow us on Twitter @DnBEconomy | #DnBEconBrief
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5. Inflation and Inflation forecastsAre cycles getting longer?
![Page 14: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/14.jpg)
14Follow us on Twitter @DnBEconomy | #DnBEconBrief
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15Follow us on Twitter @DnBEconomy | #DnBEconBrief
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6. Financial Markets’ jitterinessA Multivariate-GARCH approach to volatility
![Page 17: WEM_June](https://reader035.fdocuments.nl/reader035/viewer/2022062523/58d02fbf1a28ab04288b57ed/html5/thumbnails/17.jpg)
17Follow us on Twitter @DnBEconomy | #DnBEconBrief
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18Follow us on Twitter @DnBEconomy | #DnBEconBrief
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2007 2008 2009 2010 2011 2012 2013 2014 2015
Cor(DE,IT)
Conditional Correlation
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1.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
Cor(DE,IE)
Conditional Correlation
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2007 2008 2009 2010 2011 2012 2013 2014 2015
Cor(DE,ES)
Conditional Correlation
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Thank You