Structural VARs and structural changes. Has "new economics" changed the way economieswork?

Abstract:

The subject of this working paper is to investigate whether "new economics" e.g. globalization and the digital revolution, has changed the way economies work at the aggregate level. The paper elaborates on the findings reported in Danish Economy, Spring 1998. The consequences of "new economics" in a standard textbook Aggregate Supply / Aggregate Demand setup are evaluated and empirically testable hypotheses are derived. Structural VARs are estimated for Denmark, West Germany, United Kingdom, and the United States. The hypothesis of a structural break in the 1990s is tested but no significant breaks are found. Although there is some support for improved performance on certain markets in certain countries there is only scarce evidence of any "new economy" at work at the aggregate level.