Ana Gómez-Loscos

The two greatest. Great recession vs. great moderation

The collapse of the global economy in 2008, following the outbreak of the financial crisis, and the ensuing economic developments of the so-called Great Recession (GR) led many economists to suggest that the Great Moderation (GM) had, indeed, come to an end. This paper offers evidence that the decrease in output volatility still remains in force despite the GR and would do so even if the GR continues to extended horizons. This finding has important implications not only for academics, concerning the implementation of theoretical and empirical techniques, but also for policymakers, regarding the understanding of the pattern of recovery from the current and future recessions

‘Do versus Buy’ Decisions in the Demand for Knowledge Intensive Business Services

The search for the maximum use of scale and agglomeration economies and the need to operate firms in the most flexible way have provided a strong impulse for companies to increase their use of external intermediate services. Because of their strategic role, the use of business services that are intensive both in labour qualification and in technological requirements is key for these policies. The purpose of this paper is to analyse the patterns followed by companies in the two relevant decisions on this issue: firstly, whether to use knowledge intensive business services or not and, secondly, whether (and to what extent) to buy these services from another firm or to provide them inside the organisation. In both cases, we intend to identify the factors that affect the ‘do versus buy’ decision with respect to total KIBS as well as particular categories. A specific feature in our study is that it focuses on the behaviour of firms working in a region without a well-developed supply of KIBS. Applying discrete response models to the data obtained in a survey elaborated by the authors, the most relevant variables for the use of KIBS are satisfaction with previous outsourcing experiences and location of the firm in a large urban centre, but they do not affect their external provision. The size of the firm, its export orientation and its technological complexity have opposite effects on use and outsourcing.

The Great Moderation in Historical Perspective. Is it that Great

The Great Moderation (GM) is widely documented in the literature as one of the most important changes in the US business cycle. All the papers that analyze it use post WWII data. In this paper, for the first time we place the GM in a long historical perspective, stretching back a century and a half, which includes secular changes in the economic structure and a substantial reduction of output volatility. We find two robust structural breaks in volatility at the end of WWII and in the mid-eighties, showing that the GM still holds in the longer perspective. Furthermore, we show that GM volatility reduction is only linked to expansion features. We also date the US business cycle in the long run, finding that volatility plays a primary role in the definition of the business cycle, which has important consequences for econometricians and forecasters.

GREAT MODERATION AND GREAT RECESSION: FROM PLAIN SAILING TO STORMY SEAS?: GREAT MODERATION VS. GREAT RECESSION

Many have argued that the Great Recession of 2008 marks the end of the Great Moderation of the eighties and nineties. This paper shows this is not the case through painstaking empirical analysis of the data. Output volatility remains subdued despite the tumult created by the Great Recession. This nding has important implications for policymaking since a lower volatility of output (the hallmark of the Great Moderation) is associated with lower recoveries. JEL classication: C22, E32

The Evolution of Regional Economic Interlinkages in Europe

This paper studies the dynamics of the propagation of regional business cycle shocks in Europe and uncovers new features of its underlying mechanisms. To address the lack of high frequency data at the regional level, we propose a new method to measure timevarying synchronization in small samples that combines regime-switching models and dynamic model averaging. The results indicate that: (i) in just two years, the Great Recession synchronized Europe twice as much as the European Union integration process did over several decades; (ii) Ile de France is the region acting as the main channel for the transmission of business cycle shocks in Europe; followed by Inner London and Lombardia; and (iii) we identify a nonlinear relationship between sectoral composition and regional synchronization, which was amplified in the wake of the Great Recession. Similarities in services sectors are primarily responsible for this nonlinear relationship.

Regional business cycles across europe

Large contractionary shocks such as the Great Recession or the sovereign debt crisis in Europe have rekindled interest in analyzing the overall patterns of business cycles. We study these patterns for Europe both at the national and the regional level. We first examine business cycles’ comovements and then, using Finite Mixture Markov Models, we obtain a dating of the different business cycles and identify clusters among them. We also propose an index to analyze within-country homogeneity. Our main findings are the following: (i) we find evidence of just one cluster amongst the European countries while, at the regional level, there is more heterogeneity and we identify five different groups of European regions; (ii) the groups are characterized as follows: the first contains most of the Greek regions; groups two and three include, in most cases, regions from Germany (plus a couple of regions from southern European countries in group two and some regions of the core countries in group three); group four is populated mainly by regions belonging to northern European countries; and group five is the largest and is composed of the rest of European regions; (iii) we notice that the degree of homogeneity of regional business cycles within countries is quite different; (iv) we also observe that spatial correlation increased during the convergence process towards the introduction of the euro and has taken a big leap with the Great Recession, both at country and regional level. In fact, comovements among regions have mainly increased during the last decade. These results have important implications for policymakers in the design of convergence policies at the European level and also in the design of fiscal policies to reduce regional disparities at the country level.