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How do Individual Sectors Respond to Macroeconomic Shocks? A Structural Dynamic Factor Approach Applied to Swiss Data

Swiss Journal of Economics and Statistics2015151:BF03399416

https://doi.org/10.1007/BF03399416

Published: 2 January 2015

Summary

This paper quantifies the impact of monetary policy, exchange rates and external demand on the production sectors of the Swiss economy. As the model covers the full set of production sectors it is possible through aggregation to estimate the impact of a given shock on total GDP. We conduct the analysis in the framework of a Bayesian structural dynamic factor model. Our approach proves to be useful to cope with the large data set and at the same time allows us to consistently identify fundamental aggregate shocks. We find that monetary variables, such as interest rates and exchange rates, mainly influence the financial sectors. Variations in value added in the manufacturing sectors or business services, on the other hand, are markedly influenced by changes in external demand, but show a weaker and slower reaction to monetary variables.

JEL-Classification

C1C3E33

Keyword

Sectoral value addeddynamic factor modelsign restrictions

Notes

Authors’ Affiliations

(1)
Swiss National Bank, Zurich, Switzerland

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Copyright

© Swiss Society of Economics and Statistics 2015