Sample records for business cycles

  1. Euro area business cycles

    Atilim Seymen


    The role of global, euro area and country-specific shocks in business cycle dynamics of six euro area member countries is assessed with the aid of SVAR models. Output fluctuations are driven by global shocks to a large extent in the euro area, and no Europeanisation of business cycles due to, for example the European Monetary Union, could be established. Business cycle heterogeneity is driven mainly by (asymmetric) country-specific shocks in the euro area and not by heterogeneous responses to...

  2. Real business cycle realizations

    Smith, Gregor W.; Stanley E. Zin


    Much recent business cycle research focuses on moments of macroeconomic aggregates. We construct examples of real business cycle sample paths for output, consumption, and employment for the U.S. economy. Annual sample paths are generated from an initial condition in 1925, measured technology and government spending shocks since then, and a standard, calibrated, one-sector model of the business cycle. Quarterly sample paths are generated similarly, from an initial condition in 1955. The law of...

  3. Resuscitating Real Business Cycles

    Robert G. King; Sergio T. Rebelo


    The Real Business Cycle (RBC) research program has grown spectacularly over the last decade, as its concepts and methods have diffused into mainstream macroeconomics. Yet, there is increasing skepticism that technology shocks are a major source of business fluctuations. This chapter exposits the basic RBC model and shows that it requires large technology shocks to produce realistic business cycles. While Solow residuals are sufficiently volatile, these imply frequent technological regress. Pr...

  4. How well can business cycle accounting account for business cycles?

    Otsu, Keisuke


    The business cycle accounting method introduced by Chari, Kehoe and McGrattan (2007) is a useful tool to decompose business cycle fluctuations into their contributing factors. However, the model estimated by the maximum likelihood method cannot replicate business cycle moments computed from data. Moment-based estimation might be an attractive alternative if the purpose of the research is to study business cycle properties such as volatility, persistence and cross-correlation of variables inst...

  5. International Business Cycle

    Marek Lubiński


    Full Text Available Prime stylized facts of international business cycle theory refer to positive correlation in the cyclical components of important macroeconomic variables across countries. However a number of indicators of business cycle synchronization do not point to clear trends. It can be ascribed to the fact that different forces influence level of business cycle correlation. When investigating into the forces behind the commonness in aggregate fluctuations economic research seems to have pointed in two directions. One strand of the literature examines the idea of common exogenous shocks that affect economies simultaneously. In addition to that economic interdependencies such as trade in goods and services or capital account transactions may serve as the channels through which disturbances spill over across countries.The observed degree of output co movement reflects both the nature of the shocks that have occurred and the degree of economic interdependence. In the periods when common shocks prevail level of synchronization is usually higher than in times of transmission dominance.

  6. Entrepreneurship and the business cycle

    Thurik, Roy


    Entrepreneurship has a cyclical component, raising two questions. Is the entrepreneurship cycle related to the business cycle? And is there causality? A two-way relationship between entrepreneurship and the business cycle would be in line with the two faces of entrepreneurs: as agents of change creating upswings (opportunity entrepreneurship) and as rational actors escaping unemployment by setting up a business (necessity entrepreneurship). Nascent entrepreneurship can indeed be precyclical, ...

  7. Business Cycles Accounting for Paraguay

    Hnatkovska, Viktoria; Koehler-Geib, Friederike


    This study investigates the role of domestic and external shocks in business cycle fluctuations in Paraguay during 1991–2012. Time-series methods and a structural model-based approach are used to conduct an integrated analysis of business cycles. First, structural vector autoregression is used to assess the role played by external factors and domestic shocks in driving fluctuations in gros...

  8. Money and Business Cycles: A Real Business Cycle Interpretation

    Charles I. Plosser


    This paper focuses on the role of money in economic fluctuations. While money may play an important role in market economies, its role as an important impulse to business cycles remains a highly controversial hypothesis. For years economists have attempted to construct monetary theories of the business cycle with only limited empirical success. Alternatively, recent real theories of the cycle have taken the view that to a first approximation independent variations in the nominal quantity of o...

  9. No News in Business Cycles

    Forni, Mario; Gambetti, Luca; Sala, Luca


    This paper uses a structural, large dimensional factor model to evaluate the role of 'news' shocks (shocks with a delayed effect on productivity) in generating the business cycle. We find that (i) existing small-scale VECM models are affected by 'non-fundamentalness' and therefore fail to recover the correct shock and impulse response functions; (ii) news shocks have a limited role in explaining the business cycle; (iii) their effects are in line with what predicted by standard neoclassical t...

  10. Business Cycle Theory and Econometrics

    Allan W. Gregory; Smith, Gregor W.


    We outline in turn criticisms made by econometricians of the methods used in empirical business-cycle research and then criticisms made by business-cycle researchers of some methods used by econometricians. The aim is to clarify and in some cases correct these criticisms. Overall there is no conflict in using rigourous statistical procedures to study modern dynamic stochastic general equilibrium models. We also provide a concise bibliography of recent research on statistical methods for busin...

  11. Animal spirits and business cycles

    Bidder, Rhys


    Animal spirits are often suggested as a cause of business cycles, but they are very difficult to define. Recent research proposes a novel explanation based on the changing level of risk over time and people’s uncertainty about how the world works. The interaction of these two can lead to significant business cycle fluctuations in response to spikes in volatility. This finding gives researchers an alternative to irrational behavior as an explanation for why swings in consumer sentiment appear ...

  12. Business Cycle Theory before Keynes

    Claude Diebolt


    This article is concerned with the development of the theory of business cycles before Keynes. It is impossible to treat fully all the theories or to mention all those who have contributed to the literature. Our main consideration will be the development of cycle theory, with maximum emphasis upon ideas.

  13. Accounting for Spanish business cycles.

    Jesús Rodríguez-López; Mario Solís-García


    We apply the business cycle methodology proposed by Chari, Kehoe, and McGrattan (2007) to identify the sources of Spanish business fluctuations during two outstanding cyclical episodes: the recession alongside the transition to democracy in 1977 and the great recession of 2008. We find that the labor wedge plays a key role during both recessions and that taxes and labor market institutions are likely behind the wedge movements. We conclude that any model that tries to understand the causes of...

  14. Educational Business Cycles

    Tepe, Markus; Vanhuysse, Pieter


    teacher employment patterns at the state level in Germany and find strong evidence of cycling mechanisms, in the form of electioneering and honeymooning. Against a backdrop of a continuously shrinking total teachers' pool, German state-level incumbents accelerate the hiring of new teachers during election...

  15. Educational Business Cycles

    Tepe, Markus; Vanhuysse, Pieter

    teacher employment patterns at the state level in Germany and find strong evidence of cycling mechanisms, in the form of electioneering and honeymooning. Against a backdrop of a continuously shrinking total teachers' pool, German state-level incumbents accelerate the hiring of new teachers during election...

  16. Business Cycles in Developing Countries

    Rand, John; Tarp, Finn


    This paper demonstrates that developing countries differ considerably from their developed counterparts when focus is on the nature and characteristics of short run macroeconomic fluctuations. Cycles are generally shorter, and the stylized facts of business cycles across countries are more diverse...... than those of the rather uniform industrialized countries. Supply-side models are generally superior in explaining changes in output, but a “one-size fits all” approach in formulating policy is inappropriate. Our results also illustrate the critical importance of understanding business regularities as...

  17. Concordance in Business Cycles

    C. John McDermott; Alasdair Scott


    We study the properties of a test that determines whether two time series comove. The test computes a simple nonparametric statistic for “concordance,” which describes the proportion of time that the cycles of two series spend in the same phase. We establish the size and power properties of this test. As an illustration, the procedures are applied to output series from selected major industrial countries. We find limited evidence of widespread concordance for these countries.

  18. Grown-up business cycles

    Pugsley, Benjamin; Şahin, Ayşegül


    We document two striking facts about U.S. firm dynamics and interpret their significance for aggregate employment dynamics. The first observation is the steady decline in the firm entry rate over the last thirty years, and the second is the gradual shift of employment from younger to older firms over the same period. Both observations hold across industries and geographies. We show that, despite these trends, firms' life-cycle dynamics and business-cycle properties have remained virtually unc...

  19. Business Cycle Dependent Unemployment Insurance

    Andersen, Torben M.; Svarer, Michael

    The consequences of business cycle contingencies in unemployment insurance systems are considered in a search-matching model allowing for shifts between "good" and "bad" states of nature. We show that not only is there an insurance argument for such contingencies, but there may also be an incentive...


    Barbara Libby


    Full Text Available This paper will discuss the existence of a Canadian Political Business Cycle (PBC during the period 1946-1989. Logit analysis was used to determine if changes in the unemployment rate, growth of real GNE and the rate of inflation are significantly different in the period before an election than during the rest of the electoral term. It was found that the rate of growth in the unemployment rate declines and the rate of growth of real GNP increases in the four quarters before an election. The behavior of these variables reverses in the period after an election. These findings are consistent with a political business cycle. Policy variables, under a majority government, also behave in a manner associated with a PBC, with the government stimulating the economy approximately two years into its term so that good economic news will occur before it has to call an election. Minority governments tend to simulate the economy immediately after taking office.

  1. Immigration, remittances, and business cycles

    Federico S. Mandelman; Zlate, Andrei


    We use data on border enforcement and macroeconomic indicators from the United States and Mexico to estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of labor migration to the United States and documents how remittances to Mexico serve an insurance role to smooth consumption across the border. During expansions in the destination economy, immigration increases with the expected stream of future wage gains, but it is dampene...

  2. Sickness Absence and Business Cycles

    Jan Erik Askildsen; Espen Bratberg; Oivind Anti Nilsen


    Absenteeism is affected by the sickness benefit system. Countries with generous compensation during sick leaves also experience high numbers of sick leave. Sick leaves may vary over the business cycle due to unemployment disciplining effects or changes in labour force composition. The latter hypothesis maintains that sickness may be pro-cyclical due to employment of `marginal' workers with poorer health when demand increases. Using individual records of labour force participants in Norway, we...

  3. Entrepreneurship and the Business Cycle

    KOELLINGER, Philipp; Thurik, Roy


    This discussion paper resulted in a publication in 'The Review of Economics and Statistics' (2012). Volume 94, issue 4, pages 1143-1156. We study the cyclical pattern of entrepreneurial activity. Results across 22 OECD countries for the period 1972-2007 show that entrepreneurial activity is a leading indicator of the business cycle in a Granger-causality sense. This contradicts existing theoretical hypotheses which predict that entrepreneurship is pro-cyclical or not cyclical. We discuss poss...

  4. Business Cycle Synchronization in Croatia

    Šergo Zdravko; Poropat Amorino; Gržinić Jasmina


    The purpose of this paper is to analyze business cycle synchronization in the Croatian economy using various annualized growth rate variables over a period of eighteen years (1992-2010), de-trended by a Hodrick-Prescott filter, and following the Harding and Pagan methodological procedure in the determination of its turning points. Our conceptual analysis of synchronization is based on the technique of concordance indexes and correlation coefficients obtained by the HAC estimators. The main re...

  5. Business cycle dependent unemployment insurance

    Andersen, Torben M.; Svarer, Michael


    The consequences of business cycle contingencies in unemployment insurance systems are considered in a search-matching model allowing for shifts between "good" and "bad" states of nature. We show that not only is there an insurance argument for such contingencies, but there may also be an incentive argument. Since benefits may be less distortionary in a recession than a boom, it follows that counter-cyclical benefits reduce average distortions compared to state independent benefits. We show t...

  6. Endogenous, Imperfectly Competitive Business Cycles

    Whitta-Jacobsen, Hans Jørgen

    below -½ (at stationary equilibrium). Market power on the labor markets may have the effect that imperfectly competitive cycles are in accordance with certain empirical regularities (some well known, some reported in the paper) concerning fluctuations in output and involuntary unemployment. Since......We investigate how imperfect competition affects the occurrence and the properties of endogenous, rational expectations business cycles in an overlapping generations model with constant returns to scale in production. The model has explicit product and labor markets all characterized by...... monopolistic competition. An implicit assumption of barriers to entry justifies that the number of firms is fixed even when positive profits occur. It turns out that both market power of firms on the product markets and market power of unions on the labor markets make the occurrence of cycles more likely. In...

  7. Business Cycle and TPM of TNCs

    Junrong Liu


    This article is devoted to analyses on effects of the four phases of business cycle on transfer pricing manipulation (TPM) of transnational corporations (TNCs) and TNCs’ possible TMP practices through business cycle. The researcher herein holds that business cycle arouses the fluctuation of economical indicators and policy changes, which subsequently affect TNCs’ production, financial situation, sales and their resource allocation globally. Acting as a reasoning business being, TNCs should ta...

  8. Business cycle synchronization in Europe

    Bergman, Ulf Michael; Jonung, Lars


    In this paper we study business cycle synchronization in the three Scandinavian countries Denmark, Norway and Sweden prior to, during and after the Scandinavian Currency Union 1873–1913. We find that the degree of synchronization tended to increase during the currency union, thus supporting earlier...... empirical evidence. Estimates of factor models suggest that common Scandinavian shocks are important for these three countries. At the same time we find evidence suggesting that the importance of these shocks does not depend on the monetary regime....

  9. Seasonality and equilibrium business cycle theories

    R. Anton Braun; Evans, Charles L.


    Barksy-Miron [1989] find that the postwar U.S. economy exhibits a regular seasonal cycle, as well as the business cycle phenomenon. Are these findings consistent with current equilibrium business cycle theories as surveyed by Prescott [1986]? We consider a dynamic, stochastic equilibrium business cycle model which includes deterministic seasonals and nontime-separable preferences. We show how to compute a perfect foresight seasonal equilibrium path for this economy. An approximation to the st...

  10. Business Fixed Investment and the Recent Business Cycle in Japan

    Nobuhiro Kiyotaki; Kenneth D. West


    To analyze business fixed investment in Japan, which has been unusually volatile in recent years, we develop and apply a loglinear flexible accelerator model. We find that movements in business fixed investment are consistent with movements in output and the tax- adjusted cost of capital, both on average during our entire 1961-94 sample and during the recent 1986-94 business cycle.

  11. Austrian economics: application on Norwegian business cycles

    Bjerkenes, Håkon; Kiil, Håkon; Anker-Nilssen, Paal


    This paper reviews the key elements of Austrian macroeconomics and aims to find out whether the Austrian business cycle theory can explain causes to Norwegian business cycles between 1979 and 2009. The Austrian school suggests that monetary interventions disturb the term structure of interest rates. This causes the capital structure to change which accounts for fluctuations of the business cycle. Credit- induced expansions with unchanged time-preferences create unsustaina...

  12. Business cycle forecasting and regime switching

    Thórarinn G. Pétursson


    This paper applies Hamilton's (1989) Markov-switching model of business cycle dynamics to real GDP in Iceland for the period of 1945 to 1998. The resulting model gives a reasonable description of the data generating process for real GDP and produces business cycles that correspond quite well to conventional wisdom concerning the Icelandic business cycle. Although the model cannot be distinguished from a simple, linear time series model, it offers some improvements in terms of mean absolute fo...

  13. The Frequency Analysis of the Business Cycle

    Prof D.S.G. Pollock


    An account is given of some techniques of linear filtering that can be used for extracting the business cycle from economic data sequences of limited duration. It is argued that there can be no definitive definition of the business cycle. Both the definition of the business cycle and the methods that are used to extract it must be adapted to the purposes of the analysis; and different definitions may be appropriate to different eras.

  14. Say's Law and the Business Cycles

    Xianming Meng


    The relationship between Say's Law and the business cycle has been vigorously debated but no generally accepted agreement has yet been reached. Although this is a disputed topic, revisiting it anew could further develop economic theory, and enhance the further growth of the global economy. By scrutinising Say¡¯s Law, and its implicit business cycle theories, this paper claims that general gluts are possible, and that the essence of the business cycle is in innovation scarcity. Thus in order t...

  15. Business cycles in oil economies

    This study examines the impact of oil price shocks on output fluctuations of several oil-exporting economies. In most studies of business cycles, the role of oil price is ignored; the few studies that use oil price as one of the variables in the system focus on modeling oil-importing economies. The vector autoregression (VAR) technique is used to consider the cases of Norway, Nigeria, and Mexico. Both atheoretical and 'structural' VARs are estimated to determine the importance of oil price impulses on output variations. The study reports two types of results: variance decomposition and impulse response functions, with particular emphasis on the issues of stationarity and co-integration among the series. The empirical results suggest that shocks to oil price are important in explaining output variations. In most cases, shocks to oil price are shown to explain more than 20% of the forecast variance of output over a 40-quarter horizon

  16. Inventories in the Australian business cycle

    Chindamo, Phillip


    This Economics Research Note examines inventories in the business cycle for Australia covering the period since the mid 1980s. The Australian Bureau of Statistics (ABS) defines inventories as all materials etc., work in progress and finished goods owned by a business, whether held at locations of the business or elsewhere. These items are usually held by businesses in anticipation of a product’s sale. Inventory investment is counted as an additional contribution to gross domestic product (...

  17. The business cycle and the life cycle

    Paul Gomme; Richard Rogerson; Peter Rupert; Randall Wright


    The paper documents how cyclical fluctuations in market work vary over the life cycle and then assesses the predictions of a life-cycle version of the growth model for those observations. The analysis yields a simple but striking finding. The main discrepancy between the model and that data lies in the inability of the model to account for fluctuations in hours for individuals in the first half of their life cycle. The predictions for those in the latter half of the life cycle are quite close...

  18. Finnish and Swedish Business Cycles in a Global Context



    This paper examines the characteristics of business cycles in and across Sweden and Finland during the postwar period. We find that output fluctuations in Sweden and Finland are highly correlated to two measures of the international business cycle, a European and a non--European common business cycle component. The Swedish but not the Finnish business cycle becomes more synchronized to the European business cycle over time whereas the Finnish but not the Swedish business cycle becomes more sy...

  19. Fiscal Adjustment and Business Cycle Synchronization

    Luca Agnello; Guglielmo Maria Caporale; Ricardo M. Sousa


    Using a panel of annual data for 20 countries we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked, especially in the case of fiscal adjustments lasting 2 or 3 years. We also find: (i) little evidence of decoupling when an inflation targeting regime is unilaterally adopted; (ii) an increase in business cycle synchronization when countries fix their exchange rates and become members of a monetary union; (iii)...

  20. Fiscal adjustments and business cycle synchronization

    Agnello, Luca; Caporale, Guglielmo Maria; Ricardo M. Sousa


    Using a panel of annual data for 20 countries we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked, especially in the case of fiscal adjustments lasting 2 or 3 years. We also find: (i) little evidence of decoupling when an inflation targeting regime is unilaterally adopted; (ii) an increase in business cycle synchronization when countries fix their exchange rates and become members of a monetary union; (iii)...

  1. Price discrimination and business-cycle risk

    Cornia, Marco; Gerardi, Kristopher S.; Shapiro, Adam Hale


    A parsimonious theoretical model of second degree price discrimination suggests that the business cycle will affect the degree to which firms are able to price-discriminate between different consumer types. We analyze price dispersion in the airline industry to assess how price discrimination can expose airlines to aggregate-demand fluctuations. Performing a panel analysis on seventeen years of data covering two business cycles, we find that price dispersion is highly procyclical. Estimates s...

  2. Industry Dynamics, Investment and Business Cycles

    Julieta Caunedo


    This paper investigates how features of the business cycle interact with technological restrictions at the firm level to generate dispersion in marginal products of ex ante identical firms. The model is able to deliver a non-monotonic relationship between dispersion in marginal products, aggregate productivity and the features of the business cycle. When aggregate uncertainty is low and dispersion in marginal products is low, aggregate productivity is high. But when aggregate uncertainty is h...

  3. Expectations, Learning, and Business Cycle Fluctuations

    Stefano Eusepi; Bruce Preston


    This paper develops a theory of expectations-driven business cycles based on learning. Agents have incomplete knowledge about how market prices are determined and shifts in expectations of future prices affect dynamics. In a real business cycle model, the theoretical framework amplifies and propagates technology shocks. Improved correspondence with data arises from dynamics in beliefs being themselves persistent and because they generate strong intertemporal substitution effects in consumptio...

  4. International Business Cycle: Does Trade Matter?

    L. Picci


    This paper addresses the question of whether trade interdependencies are significant in explaining the international synchronization of business cycles, or "international business cycles". Using an econometric framework that combines the concept of separate cointegration (Granger an Konishi, 1992) with that of common feature analysis (Engle and Kozicki, 1993; Vahid and Engle, 1993), we are able to formulate meaningful ways of characterizing the links between trade flow dynamics and internatio...

  5. On Equivalence Results in Business Cycle Accounting

    NUTAHARA Kengo; Inaba, Masaru


    Business cycle accounting rests on the insight that the prototype neoclassical growth model with time-varying wedges can achieve the same allocation generated by a large class of frictional models: equivalence results. Equivalence results are shown under general conditions about the process of wedges while it is often specified to be the first order vector autoregressive when one applies business cycle accounting to actual data. In this paper, we characterize the class of models covered by th...

  6. Two Flaws In Business Cycle Accounting

    Lawrence J. Christiano; Davis, Joshua M.


    Using ‘business cycle accounting’ (BCA), Chari, Kehoe and McGrattan (2006) (CKM) conclude that models of financial frictions which create a wedge in the intertemporal Euler equation are not promising avenues for modeling business cycle dynamics. There are two reasons that this conclusion is not warranted. First, small changes in the implementation of BCA overturn CKM’s conclusions. Second, one way that shocks to the intertemporal wedge impact on the economy is by their spillover effects onto ...

  7. Behavioural Theories of the Business Cycle

    Jaimovich, Nir; Rebelo, Sérgio


    We explore the business cycle implications of expectation shocks and of two well-known psychological biases, optimism and overconfidence. The expectations of optimistic agents are biased toward good outcomes, while overconfident agents overestimate the precision of the signals that they receive. Both expectation shocks and overconfidence can increase business-cycle volatility, while preserving the model's properties in terms of comovement, and relative volatilities. In contrast, optimism is n...

  8. Behavioral Theories of the Business Cycle

    Nir Jaimovich; Sergio Rebelo


    We explore the business cycle implications of expectation shocks and of two well-known psychological biases, optimism and overconfidence. The expectations of optimistic agents are biased toward good outcomes, while overconfident agents overestimate the precision of the signals that they receive. Both expectation shocks and overconfidence can increase business-cycle volatility, while preserving the model's properties in terms of comovement, and relative volatilities. In contrast, optimism is n...




    Full Text Available The economies of the capitalist countries are continuously facing fluctuations known as business cycles. The estimation of global business cycles as well as of business cycles of different macroeconomic variables expressing the state of the economy are of utter importance for the decision making process having as a final goal the reduction of recession periods. The unemployment rate is known as a lagging indicator for the business cycles and it can offer important information regarding the business cycles forecasting. Therefore, the purpose of this study is to analyze in a comparative manner the general business cycles and the business cycles of unemployment rate in the CEE countries. The results confirm the persistence of the business cycles under analysis and the existence of great differences by countries of the reaction of unemployment business cycles to general business cycles.

  10. An essay upon the business cycle facts: the Turkish case

    Levent, Korap


    In our paper, we try to investigate the main determinants of the Turkish business cycles. Having examined some important issues of interest in business cycle theory, we estimate the business cycle stylized facts for the Turkish economy and compare the estimation results obtained in this paper to some benchmark papers chosen in business cycle literature. All in all, our estimation results give support to the importance of supply side models in explaining the Turkish business cycles in line wit...

  11. Consumer Confidence or the Business Cycle

    Møller, Stig V.; Nørholm, Henrik; Rangvid, Jesper


    Answer: The business cycle. We show that consumer confidence and the output gap both affect excess returns on stocks in many European countries: When the output gap is positive (the economy is doing well), expected returns are low, and when consumer confidence is high, expected returns are also l...... is better captured when using the European output gap as a risk factor.......Answer: The business cycle. We show that consumer confidence and the output gap both affect excess returns on stocks in many European countries: When the output gap is positive (the economy is doing well), expected returns are low, and when consumer confidence is high, expected returns are also low...

  12. Measuring business cycles in The Netherlands, 1815-1913: a comparison of business cycle dating methods

    Bonenkamp, Jan; Jacobs, Jan; Kuper, Gerard H.


    This paper compares different business cycle dating methods both on theoretical and practical grounds. Weighing the pros and cons of these methods, and based on a new data set for The Netherlands in the nineteenth century, we finally recommend two preferred methods for doing further business cycle research on the economy of the Netherlands. With respect to the methods for finding turning points in the level of economic activity, the classical cycle definition, we prefer the Bry-Boschan algori...

  13. New Approaches in Business Cycle Research: The Application of Business Cycle Indicators

    Karl Heinrich Oppenländer


    The question arises whether there can be an enrichment of business cycle research when business cycle indicators will be used in an increasing dimension. This article, dedicated to Professor Adolf Wagner, tries to differentiate three fields of research: Hypothesis formation in theory, characterisation of market imbalances and measurement of cycle and trend in empirical methods, short-term prognoses and turning point analyses in forecasting. Can we establish new hypotheses by considering expec...

  14. Attractor merging crisis in chaotic business cycles

    A numerical study is performed on a forced-oscillator model of nonlinear business cycles. An attractor merging crisis due to a global bifurcation is analyzed using the unstable periodic orbits and their associated stable and unstable manifolds. Characterization of crisis can improve our ability to forecast sudden major changes in economic systems

  15. Credit Spreads Across the Business Cycle

    Nielsen, Mads Stenbo

    This paper studies how corporate bond spreads vary with the business cycle. I show that both level and slope of empirical credit spread curves are correlated with the state of the economy, and I link this to variation in idiosyncratic jump risk. I develop a structural credit risk model that...... firm fundamentals....

  16. Business cycle fluctuations and consumption behaviour

    Bergh, Bram


    textabstractNew studies of business cycles and consumption tendencies reveal interesting and sometimes unexpected insights into consumption patterns. It appears that, while purchasing behaviour is obviously influenced by the overall economic environment, it is not merely a matter of more consumption in times of expansion, and less when the economy is contracting.

  17. Accounting for Japanese Business Cycles: a Quest for Labor Wedges

    Otsu, Keisuke


    The Japanese business cycle from 1980 to 2007 portrays a less contemporaneous correlation of labor with output than in the United States, and in addition labor tends to lead output by one quarter. A canonical real business cycle model cannot account for these facts. This paper uses the business cycle accounting method following Chari, Kehoe, and McGrattan (2007) and shows that efficiency and labor market distortions are important in accounting for the quarterly business cycle fluctuation patt...

  18. Adverse selection, risk sharing and business cycles

    Veracierto, Marcelo


    I consider a real business cycle model in which agents have private information about an idiosyncratic shock to their value of leisure. I consider the mechanism design problem for this economy and describe a computational method to solve it. This is an important contribution of the paper since the method could be used to solve a wide class of models with heterogeneous agents and aggregate uncertainty. Calibrating the model to U.S. data I find a striking result: That the information frictions ...

  19. Domestic Violence over the Business Cycle

    Gerard van den Berg; Michele Tertilt


    In this paper we estimate the effects of the business cycle on the occurrence of domestic violence. For the victims, domestic violence is among the most traumatic events conceivable. Victims (typically, children and female spouses) are often tied to the perpetrator in a relationship of economic and emotional dependence. The current recession has hit men aged 18-65, who are the usual perpetrators, especially hard. Effects of job loss and economic hardship and deprivation on domestic violence m...

  20. Exchange Rate Regimes and International Business Cycles

    Theptida Sopraseuth


    This paper investigates the impact of exchange rate regimes on international business cycles and focuses on the consequences of membership to the European Monetary System. The volatility puzzle uncovered by Baxter and Stockman [1989, Journal of Monetary Economics 23, 377–401] after assessing the consequences of the Bretton Woods system turns out to be a robust stylized fact: real and nominal exchange rates display a higher volatility under floating rates while the variability of macroeconom...

  1. Real Business Cycles: A New Keynesian Perspective

    N. Gregory Mankiw


    This paper is a critique of the latest new classical theory of economic fluctuations. According to this theory, the business cycle is the natural and efficient response of the economy to exogenous changes in the available production technology. This paper discusses several versions of this theory and argues that this line of research is unlikely to yield an empirically plausible explanation of observed economic fluctuations.

  2. Policy Risk and the Business Cycle

    Born, Benjamin; Peifer, Johannes


    The argument that policy risk, i.e. uncertainty about monetary and fiscal policy, has been holding back the economic recovery in the U.S. during the Great Recession has a large popular appeal. We analyze the role of policy risk in explaining business cycle fluctuations by using an estimated New Keynesian model featuring policy risk as well as uncertainty about technology. We directly measure uncertainty from aggregate time series using Sequential Monte Carlo Methods. While we find considerabl...

  3. The role of inventories in the business cycle

    Aubhik Khan


    Changes in the stock of firms' inventories are an important component of the business cycle. In fact, discussion about the timing of a recovery following a recession often focuses on inventories. In "The Role of Inventories in the Business Cycle," Aubhik Khan surveys the facts about inventory investment over the business cycle, then discusses two leading theories that may explain these observations.

  4. Another Look at the Ifo Business Cycle Clock

    Klaus Abberger


    Business tendency surveys are a popular instrument for business cycle analysis. The survey results are used to calculate leading business cycle indicators. For Germany the Ifo Institute publishes the Ifo business climate, which consists of the results of two questions: one question about the current situation of the respondents and a second question about their expectations for the coming months. The business climate combines the answers on both questions to a single indicator. This indicator...

  5. Incorporating the knowledge management cycle in e-business

    O, Ying-Lie; Gordijn, Jaap; Akkermans, Hans


    In e-business, knowledge can be extracted from the recorded information by intelligent data analysis and then utilised in the business transaction. E-knowledge is a foundation for e-business. E-business can be supported by an intelligent information system that provides intelligent business process support and advanced support of the e-knowledge management cycle. Knowledge is stored as knowledge models that can be updated in the e-knowledge management cycle. As illustrated in examples, the e-...

  6. The Limits of Schumpeter's Business Cycles

    Andersen, Esben Sloth


    Schumpeter designed Business Cycles as his major work, but it has never received much attention. The problem is partly related to its complex treatment of the theory of waveform economic evolution and the related study of the statistics and history of 150 years of capitalist evolution, but the book...... also makes a deliberate analytical delimitation: the emphasis on economic evolution and the placement of institutional change as an external factor. This definition of the task did not allow Schumpeter to make a full-blown study of the history of capitalist evolution. To some extent, he overcame that...

  7. Regional business cycle synchronization through expectations

    Onozaki, Tamotsu; Yanagita, Tatsuo; Kaizoji, Taisei; Toyabe, Kazutaka


    This paper provides an example in which regional business cycles may synchronize via producers’ expectations, even though there is no interregional trade, by means of a system of globally coupled, noninvertible maps. We concentrate on the dependence of the dynamics on a parameter η which denotes the inverse of price elasticity of demand. Simulation results show that several phases (the short transient, the complete asynchronous, the long transient and the intermediate transient) appear one after another as η increases. In the long transient phase, the intermittent clustering process with a long chaotic transient appears repeatedly.

  8. Dating the Italian Business Cycle: A Comparison of Procedures

    Bruno Giancarlo; Edoardo Otranto


    The problem of dating the business cycle has recently received many contributions, with a lot of proposed statistical methodologies, parametric and non parametric. Despite of this, only a few countries produce an official dating of the business cycle. In this work we try to apply some procedures for an automatic dating of the Italian business cycle in the last thirty years, checking differences among various methodologies and with the ISAE chronology. To this end parametric as well as non par...

  9. Heterogeneous Risk Preferences and the Welfare Cost of Business Cycles

    Schulhofer-Wohl, Sam


    I study the welfare cost of business cycles in a complete-markets economy where some people are more risk averse than others. Relatively more risk-averse people buy insurance against aggregate risk, and relatively less risk-averse people sell insurance. These trades reduce the welfare cost of business cycles for everyone. Indeed, the least risk-averse people benefit from business cycles. Moreover, even infinitely risk-averse people suffer only finite and, in my empirical estimates, very small...

  10. Common Shocks, Common Dynamics, and the International Business Cycle.

    Centoni, Marco; Cubadda, Gianluca; Hecq, Alain


    This paper develops an econometric framework to understand whether co-movements observed in the international business cycle are the consequences of common shocks or common transmission mechanisms. Then we propose a new statistical measure of the importance of domestic and foreign shocks over the national business cycle. We show how to decompose the business cycle effects of permanent-transitory shocks into those due to their domestic and foreign components. We apply our analys...

  11. The Brazilian business and growth cycles

    Marcelle Chauvet


    Full Text Available This paper uses several produceres to date and analyse the Brazilian business and growth cycles. In particular, a Markov switching model is fitted to quarterly and annual real production data. The smoothed probabilities of the Markov states are used as predictive rules to define different phases of cyclical fluctuations of real Brazilian production. The results are compared with different non-parametric rules. All methods implemented yield similar dating and reveal asymmetries across the different states of the Brazilian business and growth cycles, in which slowdowns and recessions are short and abrupt, while high growth phases and expansions are longer and less steep. The resulting dating of the Brazilian economic cycles can be used as a reference point for construction and evaluation of the predictive performance of coincident, leading, or lagging indicators of economic activity. In addition, the filtered probabilities obtained from the Markov switching model allow early recognition of the transition to a new business cycle phase, wich can be used, for example, for evaluation of the adequate strength and timing of countercyclical policies, for reassessment of projected sales or profits by businesses and investors, or for monitoring of inflation pressures.Este artigo utiliza vários métodos para datar e analisar ciclos de negócios e de crescimento no Brasil. Em particular, um modelo de mudanças de Markov é aplicado a dados de produção trimestrais e anuais. As probabilidades suavizadas dos estado markovianos são utilizadas como regras de previsão para definir as diferentes fases de flutuações cíclicas na produção real brasileira. Os resultados são comparados com diferentes regras não-paramétricas. Todos os métodos implementados geram uma cronologia similar e revelam assimetrias nas diferentes fases dos ciclos de negócio e crescimento do Brasil, nos quais os estados de baixo crescimento e recessão são de curta duração e mais

  12. Austrian Business Cycle Theory: Are 100 Percent Reserves Sufficient to Prevent a Business Cycle?

    Philipp Bagus


    Full Text Available Authors in the Austrian tradition have made the credit expansion of a fractional reserve banking system as the prime cause of business cycles. Authors such as Selgin (1988 and White (1999 have argued that a solution to this problem would be a free banking system. They maintain that the competition between banks would limit the credit expansion effectively. Other authors such as Rothbard (1991 and Huerta de Soto (2006 have gone further and advocated a 100 percent reserve banking system ruling out credit expansion altogether. In this article it is argued that a 100 percent reserve system can still bring about business cycles through excessive maturity mismatching between deposits and loans.

  13. The integrity management cycle as a business process

    Ackhurst, Trent B.; Peverelli, Romina P. [PIMS - Pipeline Integrity Management Specialists of London Ltd. (United Kingdom).


    It is a best-practice Oil and Gas pipeline integrity and reliability technique to apply integrity management cycles. This is conforms to the business principles of continuous improvement. This paper examines the integrity management cycle - both goals and objectives and subsequent component steps - from a business perspective. Traits that businesses require, to glean maximum benefit from such a cycle, are highlighted. A case study focuses upon an integrity and reliability process developed to apply to pipeline operators. installations. This is compared and contrasted to the pipeline integrity management cycle to underline both cycles. consistency with the principles of continuous improvement. (author)

  14. Business and Real Estate Cycles The Kuala Lumpur Office Market

    Hussein, Siti Almafahaza


    Purpose - The purpose of this paper is to apply the concept of business cycle and real estate cycle in term of their characteristics, period and sequence of the cycle to the Kuala Lumpur’s office market. Design/methodology/approach - The paper is based on previous literature review, facts, reports, and data in arriving at the conclusion of the study. Findings - This paper revealed the characteristics, period and sequence between business and real estate cycles to Kuala Lumpur’s office market....

  15. Historical Business Cycles and Market Integration: Evidence from Comovement

    Uebele, Martin


    This thesis addresses historical business cycles and market integration in Europe and America in the 19th and 20th centuries. For the analysis of historical business cycles, the widely used methodology of historical national accounting is complemented with a dynamic factor model that allows for usin

  16. Business cycle development in Czech and Slovak economies

    Poměnková, J.


    Full Text Available This paper focuses on the business cycle development of Czech and Slovak economies. The main objective is to compare several methodological approaches to identify business cycles with the main theoretical sources of the economic activity movements in the analyzed periods. As both economies are of transition type, the growth business cycle concept will be considered. In this respect, deterministic as well as stochastic methods for obtaining cyclical fluctuations are applied. Czech and Slovak economies fall into the group of transition economies where the problems of insufficient number of observations and structural changes in empirical time series analysis occur. Even if there are many similarities in the institutions of both economies, the authors identified different regular periodicities of the waves. The used frequency analysis is a slightly unique approach of business cycle modeling. The analysis of business cycle movements has significant potential to improve economic policy efficiency.

  17. Research on Business Models in their Life Cycle

    Adam Jabłoński; Marek Jabłoński


    The paper presents the results of theoretical discussions and research findings in the field of designing sustainable business models that support the creation of value at various stages of the business life cycle. The paper presents selected findings of extensive research into the business models of Polish companies listed on the Warsaw Stock Exchange. Companies which are at various stages of development should build and adapt their business models in order to maintain the ability to create ...

  18. Finnish and Swedish business cycles in a global context

    Bergman, Ulf Michael

    This paper evaluates the decisions made by the Finnish government to join EMU and the Swedish government not to join EMU in the early 1990s. Focusing on the characteristics of business cycles during the postwar period, we find that output fluctuations in Sweden and Finland are correlated to two...... measures of the international business cycle, a European and a non-European cycle. The Finnish cycle has become more synchronized to the European cycle but less synchronized to the non-EU cycle after 1999. For Sweden we find the opposite result. The decision by the Finnish government to join EMU on...

  19. Euro area business cycles in turbulent times: convergence or decoupling?

    Klaus, Benjamin; Ferroni, Filippo


    We study the business cycle properties of the four largest euro area economies in the wake of the recent recession episodes. The analysis is based on the factors estimated from a multi-country and multi-sector data-rich environment. We measure alikeness of business cycles by studying the synchronization of up and down phases, the convergence properties of country fluctuations towards the euro area cycles and the contribution of the euro area factor to national GDP volatilities. While the econ...

  20. Euro Area business cycles in turbulent times: convergence or decoupling?

    Ferroni, F.; Klaus, B.


    We study the business cycle properties of the four largest euro area economies in the wake of the recent recession episodes. The analysis is based on the factors estimated from a multi-country and multi-sector data-rich environment. We measure alikeness of business cycles by studying the synchronization of up and down phases, the convergence properties of country fluctuations towards the euro area cycles and the contribution of the euro area factor to national GDP volatilities. While the econ...

  1. Austrian Business Cycle Theory: Did Iceland go through an Austrian Business Cycle?

    Ragnar Haukur Ragnarsson 1978


    The question this research tries to answer is if an artificial credit expansion caused the Icelandic economy to go into an Austrian style business cycle in the first decade of this century. To answer that question data from the Statistic of Iceland and the Central Bank of Iceland will be studied. The period that will be looked at is the years from 2001 until 2010. The framework that is used is taken from Jesús Huerta de Soto´s book “Money, Bank Credit, and Economic Cycles”, in that book d...

  2. Analysis of Asset Classes Through the Business Cycle

    Audrius Dzikevičius


    Full Text Available This study was driven by the dissimilar performance characteristics displayed by asset classes over the business cycle. The authors aim to explore assets classes on the grounds of a scientific literature review and a statistical analysis. Business cycles are divided into four stages to explore broad movements in returns of asset classes and a possible existence of asymmetrical effects of determinants within stages. Six main asset classes were analysed: US stocks, EAFE stocks, Bonds, Gold, Real Estate and Commodities. Monthly data from February 1976 to August 2011 were used for the study. The article combines business cycle and asset allocation theories by adding valuable information about performance of asset classes during different phases of the business cycle. Using the OECD Composite Leading Indicator as a business cycle measure, the authors demonstrate that different assets classes have different return/risk characteristics over the business cycle. The article demonstrates how to use the business cycle approach for investment decision-making. The OECD Composite Leading Indicator can provide significant information on market expectations and the future outlook; hence, results of this study can help every investor improve his/her performance and risk management.

  3. Cross Border Business Cycle (Impacts on Commercial Electricity Demand

    Thomas M Fullerton Jr


    Border region electric utility service loads are impacted by national, regional, and international business cycles. To examine whether the cross-border components of these interactions can be reliably assessed, transfer ARIMA models are estimated for three business rate categories in El Paso, Texas. Chi-square goodness-of-fit results indicate tht exclusion of the international variables would worsen model performance.

  4. Measuring the Dynamics of Global Business Cycle Connectedness

    Francis X. Diebold; Kamil Yilmaz


    Using a connectedness-measurement technology fundamentally grounded in modern network theory, we measure real output connectedness for a set of six developed countries, 1962-2010. We show that global connectedness is sizable and time-varying over the business cycle, and we study the nature of the time variation relative to the ongoing discussion about the changing nature of the global business cycle. We also show that connectedness corresponding to transmissions to others from the United Stat...

  5. Financial intermediation, investment dynamics and business cycle fluctuations

    Ajello, Andrea


    How important are financial friction shocks in business cycles fluctuations? To answer this question, I use micro data to quantify key features of US financial markets. I then construct a dynamic equilibrium model that is consistent with these features and fit the model to business cycle data using Bayesian methods. In my micro data analysis, I establish facts that may be of independent interest. For example, I find that a substantial 33% of firm investment is funded using financial markets. ...

  6. Economic Integration, Business Cycle, and Productivity in North America

    M. Ayhan Kose; Roberto Cardarelli


    This paper examines the effect of the major Canada-U.S. trade agreements on the dynamics of business cycles and productivity in Canada. The North American Free Trade Agreement (NAFTA) and its predecessor, the Canada-U.S. Free Trade Agreement (CUSFTA), have led to a substantial expansion of trade flows. Although common factors have played a larger role in explaining business cycles in Canada and the United States since the early 1980s, country-specific and idiosyncratic factors remain importan...

  7. Oil Price Dynamics in a Real Business Cycle Model

    Vipin Arora; Pedro Gomis-Porqueras


    We show the importance of endogenous oil prices and production in the real business cycle framework. Endogenising these variables improves the model’s predictions of business cycle statistics, oil related and non-oil related, relative to a situation where either is exogenous. This result is robust to the standard extensions (variable capacity utilisation and monopolistic competition) used in the literature. In particular, we first show that with either exogenous oil prices or production the s...

  8. Econometric Studies of Business Cycles in the History of Econometrics

    Qin, Duo


    This study examines the evolution of econometric research in business cycle analysis during the 1960-90 period. It shows how the research was dominated by an assimilation of the tradition of NBER business cycle analysis by the Haavelmo-Cowles Commission approach, catalysed by time-series statistical methods. Methodological consequences of the assimilation are critically evaluated in light of the meagre achievement of the research in predicting the current global recession.

  9. Business cycle indexes: does a heap of data help?

    Inklaar, Robert; Jacobs, Jan; Romp, Ward


    Business cycle indexes are used to get a timely and frequent description of the state of the economy and its likely development in the near future. This paper discusses two methods for constructing business cycle indexes, the traditional NBER method and a recently developed dynamic factor model, and compares these methods for the euro area. The results suggest that a reliable indicator can be constructed from a limited number of series that are selected using economic logic.

  10. Trade, Production Sharing and the International Transmission of Business Cycles

    Ariel Burstein; Christopher Kurz; Linda Tesar


    Countries that are more engaged in production sharing exhibit higher bilateral manufacturing output correlations. We use data on trade flows between US multinationals and their affiliates as well as trade between the United States and Mexican maquiladoras to measure production-sharing trade and its link with the business cycle. We then develop a quantitative model of international business cycles that generates a positive link between the extent of vertically integrated production-sharing tra...

  11. Unemployment and Endogenous Reallocation over the Business Cycle

    Ludo Visschers; Carlos Carrillo-Tudela


    This paper presents a tractable stochastic general equilibrium model in which to study different types of unemployment over the business cycle. In our model workers face search frictions on their local labor markets and reallocation frictions across labor markets. The interaction of these two types of frictions is shown to have important implications for the analysis of resource allocation over the business cycle. We focus attention on (i) the impact on the aggregate unemployment rate, and it...

  12. Trade and Business Cycle Correlations in Asia-Pacific

    Kumakura, Masanaga; 熊倉, 正修


    Recent empirical studies challenge the traditional theory of optimum currency areas by arguing that a monetary union enhances trade and business cycle co-movements among its member countries sufficiently as to obviate the need for national monetary policy. This paper examines the empirical relationship between trade and business cycle correlations among thirteen Asia-Pacific countries, paying particular attention to the structural characteristics of their economies and other issues not explor...

  13. Analysis of Asset Classes Through the Business Cycle

    Audrius Dzikevičius; Jaroslav Vetrov


    This study was driven by the dissimilar performance characteristics displayed by asset classes over the business cycle. The authors aim to explore assets classes on the grounds of a scientific literature review and a statistical analysis. Business cycles are divided into four stages to explore broad movements in returns of asset classes and a possible existence of asymmetrical effects of determinants within stages. Six main asset classes were analysed: US stocks, EAFE stocks, Bonds, Gold, Rea...

  14. Business cycle phases in U.S. states

    Michael T. Owyang; Jeremy M. Piger; Howard J. Wall


    The U.S. aggregate business cycle is often characterized as a series of distinct recession and expansion phases. We apply a regime-switching model to state-level coincident indexes to characterize state business cycles in this way. We find that states differ a great deal in the levels of growth that they experience in the two phases: Recession growth rates are related to industry mix, whereas expansion growth rates are related to education and age composition. Further, states differ significa...

  15. The Role of Mining in an Australian Business Cycle Model

    Veroude, Alexandra


    The purpose of this paper is to evaluate a business cycle model that includes a mining sector, with the cyclical variations of the Australian Economy. Large quantities of mineral deposits are found in Australia and there exists high demand for these minerals from developing nations. This results in the mining sector contributing to a high proportion of GDP. Surprisingly, the inclusion of a mining sector has not previously been studied in a business cycle model. Australia is a small open econo...

  16. On the Role of Monetary Factors in Business Cycle Models

    Bagliano, Fabio-Cesare; Marini, Giancarlo


    Granger-causality tests and innovation analyses based on Vector Autoregression models seem to deny any role for monetary factors in generating and shaping business cycle fluctuations. The present paper shows that such empirical support for Real Business Cycle theories is flawed. In particular, it is demonstrated that an extended version of the Lucas paradigm can explain the existing evidence rather accurately, when changes in policy regimes are explicitly modelled.

  17. Agency Costs, Balance Sheets and the Business Cycle

    Philip Lowe; Thomas Rohling


    The 1980s witnessed large increases in corporate debt and sustained asset price inflation. More recently, asset prices, particularly commercial property prices, have fallen significantly. The effect of these changes on balance sheets, and their implications for the business cycle, have generated considerable interest among academics and policy makers. In this paper, we review recent theoretical models that link the evolution of the business cycle to changes in firm equity. This link arises ou...

  18. Developing Country Business Cycles: Revisiting the Stylised Facts

    Male, Rachel


    Identifying business cycle stylised facts is essential as these often form the basis for the construction and validation of theoretical business cycle models. Furthermore, understanding the cyclical patterns in economic activity, and their causes, is important to the decisions of both policymakers and market participants. Previous analyses of developing country stylised facts have tended to feature only small samples, for example the seminal paper by Agénor et al. (2000) considers just twelve...

  19. Self-employment and the local business cycle

    Svaleryd, Helena


    The business cycle is likely to be of importance for self-employment rates. When the economy is growing, business opportunities open up and encourage the set-up of new firms. In downturns self-employment may be a way to avoid unemployment. The strength of these pull and push factors may depend on the amount of human capital a person has. The findings in this paper show that although the local business cycle is of minor importance for total self-employment rates in Sweden there are heterogeneo...

  20. Good times, bad times: entrepreneurship and the business cycle

    Sanchis Llopis, JA; Millán, JM; Baptista, R.; Burke, A; Parker, SC; Thurik, R


    This article introduces the special issue on Entrepreneurship and the Business Cycle, comprising articles presented at the workshop Good Times Bad Times: Entrepreneurship and the Cycle, held at the University of Valencia in November 2011. The workshop was organized to share insights about the under-researched issue of the interplay between entrepreneurship and cyclical dimensions of entrepreneurship.

  1. Income inequality and the business cycle

    Shahee Mostafa


    Full Text Available This paper first examines the relationship between ordinary least squares estimators of consumption and investment for 36 selected countries with their respective Gini indices. The analysis shows that income inequality is consistent with a smaller estimator of consumption and a greater estimator of investment. Second, the cycles of GDP, consumption and investment are dated separately to determine how the deepness and duration of cycles of those variables are correlated with the Gini indices of countries. The results show that income inequality leads to a deeper and longer decline of GDP, which causes a greater cumulative income loss of GDP during recession, and a somewhat faster speed of recovery during expansion. Likewise, the result of a correlation between Gini indices and the number of cycles in consumption, investment and GDP indicate that income inequality is associated with a greater number of cycles in consumption and GDP and a lower number of cycles in investment.

  2. Testing the Power of Leading Indicators to Predict Business Cycle Phase Changes

    Allan Layton; Smith, Daniel R.


    In the business cycle literature researchers often want to determine the extent to which models of the business cycle reproduce broad characteristics of the real world business cycle they purport to represent. Of considerable interest is whether a model’s implied cycle chronology is consistent with the actual business cycle chronology. In the US, a very widely accepted business cycle chronology is that compiled by the National Bureau of Economic research (NBER) and the vast majority of US bus...

  3. Research on Business Models in their Life Cycle

    Adam Jabłoński


    Full Text Available The paper presents the results of theoretical discussions and research findings in the field of designing sustainable business models that support the creation of value at various stages of the business life cycle. The paper presents selected findings of extensive research into the business models of Polish companies listed on the Warsaw Stock Exchange. Companies which are at various stages of development should build and adapt their business models in order to maintain the ability to create value for stakeholders. Characteristics of business models at the early stages of development are different than at mature stages. The paper highlights the differences in business models in the context of the life cycle of companies and sustainability criteria. The paper presents research findings which show that the company’s development can be seen from the point of view of the business model. Research on business models concentrated on identifying the key attributes and the configuration of the business models appropriate for the early stage of development as well as the maturity stage. It was found that the business models of companies at an early stage of the development of companies listed on the Warsaw Stock Exchange are oriented primarily to how the company shapes, delivers, and captures value from the market in order to generate profits for shareholders and increase the value of the company, while the business models of mature companies include the intentions of management used to balance objectives with respect to different groups of stakeholders, and to carefully formulate and implement business objectives with particular attention paid to preserving the sustainability of the business. The assessment of business models from the point of view of the life cycle proves that managers change their approach to configuring business models over time; at some point, they include management intentions aimed at a broader range of goals than merely

  4. The physics of business cycles and inflation

    Hans G. Danielmeyer; Thomas Martinetz


    We analyse four consecutive cycles observed in the USA for employment and inflation. They are driven by three oil price shocks and an intended interest rate shock. Non-linear coupling between the rate equations for consumer products as prey and consumers as predators provides the required instability, but its natural damping is too high for spontaneous cycles. Extending the Lotka-Volterra equations with a small term for collective anticipation yields a second analytic solution without damping...

  5. The exposure of technology and knowledge intense sectors to the business cycle

    Werner Hölzl; Serguei Kaniovski; Andreas Reinstaller


    This paper studies the business cycle sensitivity of industries using different industry groupings. The results show that technologically intense industries are heavily affected by business cycles. While the overall importance of business cycles for long-run growth seems to be rather limited, we observe for industries with high technology intensity that business cycles may have persistent long-run effects on sectoral performance.

  6. The nuclear fuel cycle business in Japan

    In Japan, the development and use of nuclear power are considered key building blocks of safe energy supply in the 21st century. Closing the nuclear fuel cycle so as to utilize uranium and plutonium from spent fuel elements is to establish nuclear power as a quasi-domestic energy source in Japan. Japan Nuclear Fuel Ltd. is the only private enterprise in Japan to offer nuclear fuel cycle services. At Rokkasho, the company operates plants for reprocessing (under construction), uranium enrichment, treatment of radioactive waste, and a repository for low level radioactive materials. Consequently, an important sector of Japan's future energy supply is ensured on this location. (orig.)

  7. Credit Risk Migration Analysis of Illinois Farm Business: Possible Impacts of Farm Business Cycle

    Zhang, Tianwei; Katchova, Ani L.


    This study uses the cohort approach to estimate the credit risk migration probability of farm business. Using data from the Farm Business and Farm Management, this study rates the credit risk into 10 risk levels plus a default level, defines a farm business cycle with peak, normal and trough periods and evaluates the effect on farm financial performance of the farm business booms and slumps. The results show that the farms with low credit risk are more likely to stay in the same risk level bu...

  8. Turning Points: Business Cycles in Canada Since 1926

    Philip Cross; Philippe Bergevin


    Market-based economies tend to exhibit cyclical behaviour. The recent financial crisis, with devastating impacts that are still being felt today, has added urgency to the drive to improve our understanding of business cycles. Pinpointing key turning points in the economy, meaning when recession takes hold or growth resumes, is vital for policymakers, businesses and consumers alike. In this paper, the authors clarify how best to define a recession and measure its severity. And, to create a fou...

  9. Instability of capitalism inflation, unemployment, and business cycles

    Adil H. Mouhammed


    Full Text Available This paper investigates the instability of capitalism defined as a condition under which capitalism creates inflation, unemployment, and business cycles. Great economists such as Marx, Veblen, and Schumpeter have examined this problem, concluding that capitalist instability will transform capitalism. A model is developed in this paper to investigate instability, and the finding is that the basic causebehind instability is the conflict on income share: wages and profits. The fluctuations in the share of profits create inflation, unemployment, and business cycles. This generalization has been verified by using data from the American economy for the 1970s, 1980s, and the 1990s. Over this period, the paper concludes, whenthe profit share is high, moderate inflation and employment were generated, and when profit share is low, inflation, unemployment, and business cycles have appeared.

  10. Inventories, Fluctuations and Business Cycles. Working paper #4

    Maccini, Louis J.; Adrian Pagan


    The paper looks at the role of inventories in U.S. business cycles and fluctuations. It concentrates upon the goods producing sector and constructs a model that features both input and output inventories. A range of shocks are present in the model, including sales, technology and inventory cost shocks. It is found that the presence of inventories does not change the average business cycle characteristics in the U.S. very much. The model is also used to examine whether new techniques for inven...

  11. The Austrian Business Cycle Theory: Validity and Implications


    In this thesis the Austrian business cycle theory is analyzed. Based on the work of Eugen von Böhm-Bawerk (1959[1889]), Knut Wicksell (1962[1898]) and Ludwig von Mises (1953[1912]), the theory was further developed and made famous by Friedrich von Hayek in the 1930s. Arguably, Hayek was the main rival of Keynes during this decade, but after heavy criticism and the publication of the General Theory (Keynes, 1936), the Austrian business cycle theory was left with few advocates by the end of Wor...

  12. Business Cycle Accounting for Argentina Utilizing Capital Utilization

    Tiago Cavalcanti; Pedro Elosegui; George McCandless; Emilio Blanco


    We use a variation on the business cycle accounting method of Chari, Kehoe and McGrattan (CKM) to study the business cycle in Argentina from 1972 to 2006. The method uses real data together with the equilibrium conditions of a prototype growth model to measure four wedges that are explained by the variables of the model. These wedges can be viewed as distortions from a perfectly competitive economy and represent the result of a set of policies and institutions which affect productivity and fa...

  13. Payroll Taxes, Social Insurance and Business Cycles

    Burda, Michael C.; Weder, Mark


    Payroll taxes represent a major distortionary influence of governments on labor markets. This paper examines the role of payroll taxation and the social safety net for cyclical fluctuations in a nonmonetary economy with labor market frictions and unemployment insurance, when the latter is only imperfectly related to search effort. A balanced social insurance budget renders gross wages more rigid over the cycle and, as a result, strengthens the model’s endogenous propagation mechanism. For con...

  14. Market Wide Liquidity Instability in Business Cycles

    Chatterjee, Sidharta


    This paper deals with an existing question; does market liquidity disequilibrium leads to stock market bubble burst? Contemporary research has shown that liquidity is the key driving force behind capital market growth and its sustenance. Stock markets usually react to changes in market-wide liquidity, whose supply-demand cycle fluctuates with investor behavior actions. Market illiquidity due to supply shocks or sudden redemption, does exert strain on the financial markets as of when if too mu...

  15. Business Cycles in Emerging Economies: the role of interest rates

    Pablo A. Neumeyer; Fabrizio Perri


    We find that in a sample of emerging economies business cycles are more volatile than in developed ones, real interest rates are countercyclical and lead the cycle, consumption is more volatile than output and net exports are strongly countercyclical. We present a model of a small open economy, where the real interest rate is decomposed in an international rate and a country risk component. Country risk is affected by fundamental shocks but, through the presence of working capital, also ampli...

  16. Business cycles and leading indicators of industrial activity in India

    Mohanty, Jaya; Singh, Bhupal; Jain, Rajeev


    The identification of business cycles in India and construction of a composite leading indicator for forecasting the cyclical turning points have been the focus of this study. The cyclical analysis of monthly index of industrial production (IIP) in India applying the Bry-Boschan procedure indicates that there have been 13 growth cycles in the Indian economy with varying durations during 1970-71 to 2001-02. While the average duration of expansion has been 12 months, the recessions are characte...

  17. A Simple Real Business Cycle Model of the Czech Economy

    Baxa, Jaromír

    Bratislava : University of Economics in Bratislava, 2008, s. 28-38 ISBN 978-80-8078-217-7. [Quantitative Methods in Economics: Multiplie Criteria Decision Making XIV. Tatranská Lomnica (SK), 05.07.2008-07.07.2008] Institutional research plan: CEZ:AV0Z10750506 Keywords : real business cycle * DSGE model * Kdylant-Prescott filter * Czech economy Subject RIV: AH - Economics

  18. Business cycle fluctuations and excess sensitivity of private consumption

    Gert Peersman; Lorenzo Pozzi


    We investigate whether business cycle fluctuations affect the degree of excess sensitivity of private consumption growth to disposable income growth. Using multivariate state space methods and quarterly US data for the period 1965-2000 we find that excess sensitivity is significantly higher during recessions.

  19. National Business Cycles and Community Competition for Jobs.

    Kasarda, John D.; Irwin, Michael D.


    Analysis of employment change data for 3,101 counties during recent national recession and recovery periods found that factors derived from human ecological theory (density, infrastructure age, unionization, labor force education, and crime rate) best predicted local competitive dynamics across all business-cycle phases. Contains 60 references.…

  20. A comparison of exchange economies within a monetary business cycle

    Benk, S.; Gillman, M.; Kejak, Michal

    -, E2005/14 (2005), s. 1-26. ISSN 1749-6101 Institutional research plan: CEZ:AV0Z70850503 Keywords : cash-in-advance * credit production * monetary business cycle Subject RIV: AH - Economics

  1. Managing Business-to-Business Relationships throughout the E-Commerce Procurement Life Cycle.

    Archer, Norm; Yuan, Yufei


    Since the core of e-commerce is information and communications, support for managing customer relationships is available to those who know how to use it. Discusses how technology can be used to encourage and facilitate customer-business relationships. Shows through a customer relationship life cycle model how the management of related procurement…

  2. Informational Asymmetries and the International Transmission of Business Cycles

    Patricio Mujica


    Full Text Available Informational Asymmetries and the International Transmission of Business Cycles Several recent papers have analyzed the international transmission of economic disturbances in a context in which all goods are traded. Additionaly, those papers assume alternatively full contemporaneous infomation on financial variables is not available at all. A key feature of the model is that agent in each country observe all those variables directly linked with the markets in wich they usuallyy trade but they do not have access to the infomation provided by the market for nontraded goods in the foreign countrv. Therefore. the introduction of nontreded goods provides a natural settings for assuming an asymmetry in the information set available to agents across countries. It is shown that this asymmetry is crucial for the existence of real effects associated with monetary shocks and also for the nature of the international transmission  of business cycles across countries.

  3. Instability of capitalism inflation, unemployment, and business cycles

    Adil H. Mouhammed


    This paper investigates the instability of capitalism defined as a condition under which capitalism creates inflation, unemployment, and business cycles. Great economists such as Marx, Veblen, and Schumpeter have examined this problem, concluding that capitalist instability will transform capitalism. A model is developed in this paper to investigate instability, and the finding is that the basic cause behind instability is the conflict on income share: wages and profits. The fluctuations i...

  4. Instability of capitalism inflation, unemployment, and business cycles

    Adil H. Mouhammed


    This paper investigates the instability of capitalism defined as a condition under which capitalism creates inflation, unemployment, and business cycles. Great economists such as Marx, Veblen, and Schumpeter have examined this problem, concluding that capitalist instability will transform capitalism. A model is developed in this paper to investigate instability, and the finding is that the basic causebehind instability is the conflict on income share: wages and profits. The fluctuations in th...

  5. Essays on oil and business cycles in Saudi Arabia

    Aba Alkhail, Bandar A.

    This dissertation consists of three chapters. Chapter one presents a theoretical model using a dynamic stochastic general equilibrium (DSGE) approach to investigate the role of world oil prices in explaining the business cycle in Saudi Arabia. This model incorporates both productivity and oil revenue shocks. The results indicate that productivity shocks are relatively more important to business cycles than oil shocks. However, this model has some unfavorable features that are associated with both investment and labor hours. The second chapter presents a modified theoretical model using DSGE approach to examine the role of world oil prices versus productivity shocks in explaining the business cycles in Saudi Arabia. To overcome the unfavorable features of the baseline model, the alternative model adds friction to the model by incorporating investment portfolio adjustment cost. Thus, the alternative model produces similar dynamics to that of the baseline model but the unfavorable characteristics are eliminated. Also, this chapter conducts sensitivity analysis. The objective of the third chapter is to empirically investigate how real world oil price and productivity shocks affect output, consumption, investment, labor hours, and trade balance/output ratio for Saudi Arabia. This chapter complements the theoretical model of the previous chapters. In addition, this study builds a foundation for future studies in examining the impact of real world oil price shocks on the economies of key trade partners of Saudi Arabia. The results of the third chapter show that productivity shocks matter more for macroeconomic fluctuations than oil shocks for the Saudis' primary trade partners. Therefore, fears of oil importing countries appear to be overstated. As a whole, this research is important for the following reasons. First, the empirical model is consistent with the predictions of our theoretical model in that productivity is a driving force of business cycles in Saudi Arabia

  6. Stock Market Dispersion, Sectoral Shocks, and the German Business Cycle

    Döpke, Jörg; Pierdzioch, Christian


    This paper elaborates on the relative importance of sectoral shocks for real economic activity in Germany. Implications of multi-sectoral real business cycle models are examined by resorting to testing techniques based on stock market returns. The empirical evidence is obtained by calculating cross-correlation coefficients of sectoral stock market returns with industrial production, by estimating a limited dependent variable model, and by setting up a trivariate structural vector autoregressi...

  7. Individuals' Unemployment Experiences: Heterogeneity and Business Cycle Effects

    Kalwij, Adriaan S.


    This study examines individuals? unemployment experiences from the age of 18 up to the age of 35 using a large panel of administrative records on unemployment related benefit claims of men in the United Kingdom over the past two decades. The main focus is on the extent to which individuals? unemployment experiences are affected by regional and skill differences, i.e. individual heterogeneity, and the business cycle. In particular this study analyses the extent to which repeated unemployment i...

  8. Nominal stylized facts of U. S. business cycles

    Apostolos Serletis; David Krause


    The authors investigate the basic nominal stylized facts of business cycles in the United States, using monthly data from 1960:1 to 1993:4 and the methodology suggested by Kydland and Prescott (1990). They make comparisons among simple sum and Divisia aggregates, using the Thornton and Yue (1992) series of Divisia monetary aggregates, and they investigate the robustness of the results to relevant nonstochastic stationarity-inducing transformations.

  9. Searching for opportunistic political business cycles in Turkey.

    Asutay, M.


    The literature on political business cycles (PBC) suggests that incumbent governments manipulate the economy for political reasons, in particular for winning elections. Accordingly, it is argued that incumbent governments manipulate the economy to create better economic conditions in the pre-election period with declining unemployment and increasing growth rates of the economy and inflation to enhance the likelihood of reelection. The theory suggests that post-election periods ...


    Philip Liu


    This paper examines the sources of Australia's business cycle fluctuations focusing on the role of international shocks and short run stabilization policy. A VAR model identified using robust sign restrictions derived from an estimated structural model is used to aid the investigation. The results indicate that, in contrast to previous VAR studies, foreign factors contribute over half of domestic output forecast errors whereas innovation from output itself has little effect. Furthermore, mone...

  11. Business Cycle Synchronization in the East Asian Economies

    Xulan Yu; Yoshihiko Tsukuda


    The paper examines the possibility of financial cooperation by investigating the business cycle synchronization among the eight core East Asian countries(China, Japan, Korea, Indonesia, Malaysia, the Philippines, Singapore, and Thailand) using the logarithm of per capita real GDP data from 1994Q1 to 2005Q3. The paper employs the model of multivariate time series analysis developed by Engle and Kozicki (1993) and Vahid and Engle (1993). The empirical study reveals that the per capita real GDP ...

  12. How is Tax Policy Conducted over the Business Cycle?

    Carlos A. Vegh; Guillermo Vuletin


    It is well known by now that government spending has typically been procyclical in developing economies but acyclical or countercyclical in industrial countries. Little, if any, is known, however, about the cyclical behavior of tax rates (as opposed to tax revenues, which are endogenous to the business cycle and hence cannot shed light on the cyclicality of tax policy). We build a novel dataset on tax rates for 62 countries for the period 1960-2013 that comprises corporate income, personal in...

  13. Advertising and price effectiveness over the business cycle.

    Gijsenberg, Maarten; Heerde, Harald J. van; Dekimpe, Marnik; Steenkamp, Jan-Benedict E. M


    In this study, the authors conduct a systematic investigation on the evolution in the effectiveness of two important marketing mix instruments, advertising and price, over the business cycle. Analyses are based on 163 branded products in 37 mature CPG categories in the UK, and this for a period of 15 years. The data are a combination of (i) monthly national sales data, (ii) monthly advertising data, (iii) data on the general economic conditions, and (iv) consumer survey data. Consumers are sh...

  14. Advertising and price effectiveness over the business cycle

    Gijsenberg, Maarten; van Heerde, Harald; Dekimpe, Marnik G.; Steenkamp, Jan-Benedict E. M


    In this study, the authors conduct a systematic investigation on the evolution in the effectiveness of two important marketing mix instruments, advertising and price, over the business cycle. Analyses are based on 163 branded products in 37 mature CPG categories in the UK, and this for a period of 15 years. The data are a combination of (i) monthly national sales data, (ii) monthly advertising data, (iii) data on the general economic conditions, and (iv) consumer survey data. Consumers are sh...

  15. Small sample properties of GMM for business cycle analysis

    Lawrence J. Christiano; Wouter Den Haan


    We investigate, by Monte Carlo methods, the finite sample properties of GMM procedures for conducting inference about statistics that are of interest in the business cycle literature. These statistics include the second moments of data filtered using the first difference and Hodrick-Prescott filters, and they include statistics for evaluating model fit. Our results indicate that, for the procedures considered, the existing asymptotic theory is not a good guide in a sample the size of quarterl...

  16. Fluctuations in a mixed IS-LM business cycle model

    Hamad Talibi Alaoui


    Full Text Available In the present paper, we extend a delayed IS-LM business cycle model by introducing an additional advance (anticipated capital stock in the investment function. The resulting model is represented in terms of mixed differential equations. For the deviating argument $au$ (advance and delay being a bifurcation parameter we investigate the local stability and the local Hopf bifurcation. Also some numerical simulations are given to support the theoretical analysis.

  17. Trade Volatility, Business Cycle Synchronization, and Inventory Dynamics

    Virgiliu Midrigan; Joseph Kaboski; George Alessandria


    We study the role of inventories for the volatility of international trade and the propagation of business cycles. We build a model of international trade in which intermediaries have a precautionary motive to hold inventories. With either productivity or demand shocks, we find inventories increase the volatility of international trade whenever traded goods have relatively high inventory holdings. Moreover, net exports are now more strongly countercyclical and appear in line with the data. We...


    Oana Simona HUDEA (CARAMAN); Sorin George TOMA; Marin BURCEA


    The present paper aims at describing some key elements of the new classical theory-related model, namely the Real Business Cycle, mainly describing the economy from the perspective of a perfectly competitive market, characterised by price, wage and interest rate flexibility. The rendered impulse-response functions, that help us in revealing the capacity of the model variables to return to their steady state under the impact of a structural shock, be it technology or monetary policy oriented, ...

  19. The dynamics of entrepreneurship: hysteresis, business cycles and government policy

    Congregado, Emilio; Golpe, Antonio A.; Parker, Simon C.


    This paper estimates an unobserved components model to explore the macro dynamics of entrepreneurship in Spain and the US. We ask whether entrepreneurship exhibits hysteresis, defined as a macro dynamic structure in which cyclical fluctuations have persistent effects on the natural rate of entrepreneurship. We find evidence of hysteresis in Spain, but not the US, while in both countries business cycle output variations significantly affect future rates of entrepreneurship. The article discuss...

  20. Dynamics of the driven Goodwin business cycle equation

    We study dynamics of the Goodwin nonlinear accelerator business cycle model with periodic forced autonomous investment Ia(t) = a(1 – cos ωt), where a and ω are the amplitude and the frequency of investment. We give examples of the parameters a and ω when the chaotic oscillations of income are possible. We find the critical values of amplitude acr (ω): if a > acr (ω) the period of the income equals to the driving period T=2π/ω

  1. A Business Cycle Analysis of Debt and Equity Financing

    Karabarbounis , Marios; Macnamara, Patrick; McCord, Roisin


    This article provides an introductory, yet comprehensive, business cycle analysis of firm financing. Using data from Compustat, we find that debt issuance is procyclical while the net sale of stock is countercyclical. However, an equity financing measure that includes stock compensation and especially mergers turns out to be weakly procyclical. Nevertheless, there is widespread heterogeneity in firm financing. Compared to large firms, the equity issuance of small firms tends to be more procyc...

  2. A Model of Primary and Secondary Waves in Business Cycles

    Fioretti, G.


    Schumpeter maintained that oscillations of macroeconomic variables are only the “secondary wave” of business cycles, a reflex of more fundamental “primary waves” at the microeconomic level caused by the innovating activity of entrepreneurs. Blending Schumpeter’s concern for innovation with Keynes’ concern for uncertainty and expectation formation, this article focuses on the behaviour of entrepreneurs in front of the uncertainty caused by innovation. Entrepreneurs’ behaviour is reconstructed ...

  3. Real Business Cycle Models of the Great Depression

    Pensieroso, Luca


    The Great Depression of the 1930s is again on the frontier of research in macroeconomics. Researchers working in the real business cycle (RBC) tradition have recently started to apply their theoretical apparatus to the event. This paper discusses the result of their work and assesses the role of history and macroeconomics in analysing the Great Depression. I argue that the breaking of the depression taboo in macroeconomics has been a desirable completion of the cliometric revolution: no histo...

  4. Ragnar Frisch’s contribution to business cycle analysis



    Business cycle analysis, i.e. investigations into the more or less regular fluctuations in economic activity, emerged around the mid-nineteenth century. During Ragnar Frisch’s formative years as a young economist the field came to the centre of attention. Frisch was highly concerned about the inability of modern economies in the midst of plenty to prevent economic fluctuations from playing havoc with the livelihood of millions. He first directed his attention towards methods for analysing tim...

  5. Health disparities across income and the business cycle

    Hildur Margrét Jóhannsdóttir 1994


    We examine how business cycles affect income-related distribution of diseases and health disorders. By using data from a survey conducted by the Directorate of Health in Iceland in 2007, 2009 and 2012 we aim at examining how the prevalence of thirty diseases and health conditions is distributed across the income spectrum. Furthermore, we take advantage of the unusually sharp changes in economic conditions in Iceland during the Great Recession initiated in 2008 and the partial recovery that ha...

  6. Financial Constraints, Financial Shocks, and Business Cycle Accounting.

    RIMARCHI, Massimiliano


    This thesis features three closely related chapters investigating the role of the investment wedge in affecting macroeconomic fluctuations. The first chapter shows that the Business Cycle Accounting (BCA) methodology is sensitive to the specification of households preferences in identifying the role of the investment wedge. A poor performance of the investment wedge and of the financial frictions it represents, such as the one BCA finds on 2007-2010 US data and other past events, is compatibl...

  7. Determinants of Business Cycle Comovement: A Robust Analysis

    Marianne Baxter; Michael A. Kouparitsas


    This paper investigates the determinants of business cycle comovement between countries. Our dataset includes over 100 countries, both developed and developing. We search for variables that are “robust” in explaining comovement, using the approach of Leamer (1983). Variables considered are (i) bilateral trade between countries; (ii) total trade in each country; (iii) sectoral structure; (iv) similarity in export and import baskets; (v) factor endowments; and (vi) gravity variables. We find th...

  8. Imperfect Competition, Nominal Wage Contracts and the Business Cycle

    Zuzana Janko


    We introduce nominal wage contracts into a competitive and a noncompetitive labor market structure. We find these models to have similar business cycle properties, but we argue that the imperfectly competitive market structure is more appropriate for nominal wage contract analyzes. We introduce imperfect competition to the labor market by assuming that households have market power and consequently choose nominal wage contracts as part of their maximization problem, while in a competitive stru...

  9. Income Risk and Aggregate Demand over the Business Cycle

    Mericle, David


    This dissertation consists of three essays on income risk and aggregate demand over the business cycle, each addressing an aspect of the Great Recession. The first chapter reframes the standard liquidity trap model to illustrate the costly feedback loop between idiosyncratic risk and aggregate demand. I first show that a liquidity trap can result from excess demand for precautionary savings in times of high uncertainty. Second, I show that the output and welfare costs of the ensuing recession d...

  10. Capital Market Frictions, Business Cycle and Monetary Transmission

    Olivier Pierrard


    Empirical evidence shows that some firms may be capital constraint because of capital market imperfections. We therefore extend the business cycle models with frictions `a la Pissarides on the labour market by also introducing symmetric frictions on the capital market. We show that the capital market frictions (and their interactions with the labour market frictions) improve the statistical properties of the model and generate a financial accelerator.

  11. Employed and unemployed job seekers and the business cycle

    Longhi, Simonetta; Taylor, Mark


    The job search literature suggests that on-the-job search reduces the probability of unemployed people finding a job. However, there is little evidence that employed and unemployed job seekers are similar or apply for the same jobs. We compare employed and unemployed job seekers in terms of their individual characteristics, preferences over working hours, job-search strategies and employment histories, and identify how any differences vary over the business cycle. We find systematic differenc...


    Claudiu-Gabriel Tiganas; Claudiu Peptine


    This paper analyzes the fundamental concepts that compose the phenomenon of political business cycle and the models that have been created to support this theoretical background. A first theory on this concept is considered to be the classic perspective, which has been developed by William Nordhaus in 1975. As a result of his work, other research started to appear with multiple theories and vis ions upon this phenomenon. Through this paper we have tried to highlight the most important of thes...

  13. How Important are Financial Shocks for the Canadian Business Cycle?

    Shin-Ichi Nishiyama


    In this paper, we investigate the importance of financial shocks for the Canadian business cycle employing the financial friction DSGE framework following Bernanke, Gertler, and Gilchrist (1999) with an extension of a small-open economy feature. In particular, we explored the importance of an external finance premium shock and an aggregate net worth shock. In order to identify financial shocks in the model, we utilized financial data in estimating our model. Our variance decomposition results...

  14. Various problems in establishment of fuel cycle business in Japan

    Since Japan instituted the Atomic Energy Act in 1956, and organized the Atomic Energy Commission, as the fundamental policy of the peaceful use of atomic energy, the industrialization and establishment of fuel cycle technology have been advanced as well as the development of power reactors. The consistent and harmonious industrialization of uranium enrichment, fuel fabrication, reprocessing, the utilization of recovered plutonium and uranium, and the storage, treatment and disposal of wastes has been the target. As the nuclear power generation in Japan grew, the enhancement of the various factors of nuclear fuel cycle as the base of supporting nuclear power generation has become necessary. The effort of technical development has been continued in the fields of uranium enrichment, fuel reprocessing, plutonium fuel and waste treatment by the Power Reactor and Nuclear Fuel Development Corp., Japan Atomic Energy Research Institute and related industries. The plan and present status of nuclear fuel cycle business in Japan, the problems such as the roles of the government and private enterprises, technology transfer, the economy of nuclear fuel cycle business, the industrialization of mixed oxide fuel fabrication, nuclear nonproliferation policy and location are discussed. (Kako, I.)

  15. Business Cycle Accounting in a Small Open Economy

    Jacek Rothert; Mohammad Rahmati


    Building on Chari et al. (2007), we develop a method to assess theories of business cycles in small open economies. We build a diagnostic economy with time-varying distortions (wedges), which measure the gap between model generated aggregates and the data. We introduce two new wedges, which allow us to fully account for the movements in the trade balance and the current account: (i) the trend-shock wedge and (ii) the debt price wedge. We show how various detailed models with frictions map to ...

  16. Fiscal Policy over the Real Business Cycle: A Positive Theory

    Marco Battaglini; Stephen Coate


    This paper presents a political economy theory of the behavior of fiscal policy over the business cycle. The theory predicts that, in both booms and recessions, fiscal policies are set so that the marginal cost of public funds obeys a submartingale. In the short run, fiscal policy can be pro-cyclical with government debt spiking up upon entering a boom. However, in the long run, fiscal policy is counter-cyclical with debt increasing in recessions and decreasing in booms. Government spending i...

  17. Development on nuclear fuel cycle business in Japan

    The Japan Nuclear Fuel Co., Ltd. (JNF) develops five businesses on nuclear fuel cycle such as uranium concentration, storage and administration of high level radioactive wastes, disposition of low level radioactive wastes, used fuel reprocessing, MOX fuel, at Rokkasho-mura in Aomori prefecture. Here were introduced on outline, construction and operation in reprocessing and MOX fuel works, outline, present state and future subjects on technical development of uranium concentration, outline and safety of disposition center on low level radioactive wastes, and storage and administration of high level radioactive wastes. (G.K.)

  18. Modelling supply networks and business cycles as unstable transport phenomena

    Helbing, Dirk


    Physical concepts developed to describe instabilities in traffic flows can be generalized in a way that allows one to understand the well-known instability of supply chains (the so-called 'bull-whip effect'). That is, small variations in the consumption rate can cause large variations in the production rate of companies generating the requested product. Interestingly, the resulting oscillations have characteristic frequencies which are considerably lower than the variations in the consumption rate. This suggests that instabilities of supply chains may be the reason for the existence of business cycles. At the same time, we establish some links to queueing theory and between micro- and macroeconomics.

  19. Banking firm and hedging over the business cycle

    Wong, KP; Broll, U


    This paper examines the behavior of a banking firm under risk. The banking firm can hedge its risk exposure by trading futures contracts. The banking firm is risk averse and possesses a utility function defined over its end-of-period income and a state variable that denotes the business cycle of the economy. We show that the banking firm optimally opts for an over-hedge or an under-hedge, depending on whether the returns on the futures contracts are negatively or positively correlated with th...


    Oana Simona HUDEA (CARAMAN


    Full Text Available The present paper aims at describing some key elements of the new classical theory-related model, namely the Real Business Cycle, mainly describing the economy from the perspective of a perfectly competitive market, characterised by price, wage and interest rate flexibility. The rendered impulse-response functions, that help us in revealing the capacity of the model variables to return to their steady state under the impact of a structural shock, be it technology or monetary policy oriented, give points to the neutrality of the monetary entity decisions, therefore confirming the well-known classical dichotomy existing between the nominal and the real factors of the economy.

  1. Immigrant earnings: Language skills, linguistic concentrations and the business cycle

    Paul W. Miller; Chiswick, Barry R.


    This study of the determinants of earnings among adult foreign-born men using the 1990 Census of Population focuses on the effects of the respondent's own English language skills, the effects of living in a linguistic concentration area, and the effects of the stage of the business cycle at entry into the U.S. labor market. The analysis demonstrates the importance of English language fluency among the foreign born from non-English speaking countries. There is also strong evidence for the comp...

  2. The International Finance Multiplier in Business Cycle Fluctuations

    Naohisa Hirakata; Takushi Kurozumi


    In the wake of the gGreat Recessionh of 2007-09, recent studies have emphasized the importance of the ginternational finance multiplier (IFM)h mechanism for inter- national business cycles, using calibrated two-country models. This paper develops and estimates a two- country model with the IFM mechanism using 21 time series from the Euro Area (EA) and the US. The estimation results show that during the past quarter-century, EA shocks to the external finance premium and net worth not only had ...

  3. Codimension-2 bifurcations of the Kaldor model of business cycle

    Research highlights: → The conditions are given such that the characteristic equation may have purely imaginary roots and double zero roots. → Purely imaginary roots lead us to study Hopf and Bautin bifurcations and to calculate the first and second Lyapunov coefficients. → Double zero roots lead us to study Bogdanov-Takens (BT) bifurcation. → Bifurcation diagrams for Bautin and BT bifurcations are obtained by using the normal form theory. - Abstract: In this paper, complete analysis is presented to study codimension-2 bifurcations for the nonlinear Kaldor model of business cycle. Sufficient conditions are given for the model to demonstrate Bautin and Bogdanov-Takens (BT) bifurcations. By computing the first and second Lyapunov coefficients and performing nonlinear transformation, the normal forms are derived to obtain the bifurcation diagrams such as Hopf, homoclinic and double limit cycle bifurcations. Some examples are given to confirm the theoretical results.

  4. Business cycles and workplace accidents in Iceland 1986- 2011

    Tinna Laufey Ásgeirsdóttir


    Full Text Available This study is the first to explore the association between business cycles and workplace accidents using Icelandic data. The relationship is evaluated for the entire labor market, for specific sectors, by gender and by the severity of injuries. Most prior research has found workplace accidents to be pro-cyclical. Hypothesized reasons include increased labor supply and greater work intensity in upswings, and that accidents are more likely to be reported. Aggregate data for workplace accidents from the Administration of Occupational Safety and Health and several macroeconomic indicators from Statistics Iceland and Directorate of Labour were examined. The time series were non-stationary so first differences were used to detrend them. Their relationship was then examined using a linear regression model. Data from the Directorate of Health in Iceland and Statistics Iceland were used to calculate the relative risk of an accident. Pro-cyclical associations between business cycles and work-place accidents were observed, particularly in construction, in commerce and for men. The results of the relative-risk calculations indicated that workers were at considerably greater risk of having an accident in 2007 than in 2004-2006 and 2008-2011. By comparing the different estimations of the study, one can conclude that only a small part of the variability of risk can be explained by changes in labour supply. Increased risk at work, given the labor supply, seems to be a more significant reason for increased prevalence of accidents during periods of economic expansion.

  5. Using complex networks to characterize international business cycles.

    Petre Caraiani

    Full Text Available BACKGROUND: There is a rapidly expanding literature on the application of complex networks in economics that focused mostly on stock markets. In this paper, we discuss an application of complex networks to study international business cycles. METHODOLOGY/PRINCIPAL FINDINGS: We construct complex networks based on GDP data from two data sets on G7 and OECD economies. Besides the well-known correlation-based networks, we also use a specific tool for presenting causality in economics, the Granger causality. We consider different filtering methods to derive the stationary component of the GDP series for each of the countries in the samples. The networks were found to be sensitive to the detrending method. While the correlation networks provide information on comovement between the national economies, the Granger causality networks can better predict fluctuations in countries' GDP. By using them, we can obtain directed networks allows us to determine the relative influence of different countries on the global economy network. The US appears as the key player for both the G7 and OECD samples. CONCLUSION: The use of complex networks is valuable for understanding the business cycle comovements at an international level.

  6. The Convergence of European Business Cycles 1980-2004

    The degree of convergence of the business cycles of the economies of the European Union is a key policy issue. In particular, a substantial degree of convergence is needed if the European Central Bank is to be capable of setting a monetary policy which is appropriate to the stage of the cycle of the Euro zone economies. I consider the annual rates of real GDP growth on a quarterly basis in the main economies of the EU (France, Germany, Italy, UK, Spain, Belgium and the Netherlands) over the period 1980Q1-2004Q4. An important empirical question is the degree to which the correlations between these growth rates contain true information rather than noise. The technique of random matrix theory is able to answer this question, and has been applied successfully in the physics journals to financial markets data. I find that the correlations between the growth rates of most of the core EU economies contain substantial amounts of true information, and exhibit considerable stability over time. Even in the late 1970s and early 1980s, these economies moved together closely over the course of the business cycle. There was a slight loosening at the time of German re-unification, but the economies have moved back into close synchronisation. The same result holds when Spain is added to the group of core EU countries. However, the problems of the German economy which arose from the early 1990s onwards has led to Germany becoming increasingly less synchronised with the rest of the core EU. Further, the results obtained with a data set of the converged EU core plus the UK show no real convergence between the UK and this group of economies. (author)

  7. Milan’s Cycle as an Accurate Leading Indicator for the Italian Business Cycle

    Matteo Pelagatti; Valeria Negri


    A coincident business cycle indicator for the Milan area is built on the basis of a monthly industrial survey carried out by Assolombarda, the largest territorial entrepreneurial association in Italy. The indicator is extracted from three time series concerning the production level and the internal and foreign order book as declared by some 250 Assolombarda associates. This indicator is potentially very valuable in itself, being Milan one of the most dynamic economic systems in Italy and Euro...

  8. Business cycle model on the basis of “systems potential” method.

    Grigorii Pushnoi


    The new business cycle three-dimensional model is formulated on the basis of new system approach known as the System Potential Method. Cyclical dynamics with catastrophe jumps (alike to Varian' model) and some stochastic properties is described. Properties of such cycles are similar to the properties of the typical business cycle.

  9. Are there two types of business cycles? a note on crisis detection

    Robert Pater


    Full Text Available Business cycles are highly irregular fluctuations in economic activity. This article attempts to determine whether there are some properties of business cycles that can make them look more regular. This is done by analysing business cycle dynamics, especially by employing and adjusting to contemporary business cycle analysis the theories of growth cycles and classical cycles. The non-homogeneity of business cycles is surveyed in theory and practice with use of ad hoc filtering, spectral analysis and unobserved components models. With their use business cycles are extracted. Several macroeconomic indicators for 32 economies are analysed to draw up additional characteristics of contemporary business cycles. The author proposes that fluctuations in economic activity lasting 8-19 quarters should be called ‘growth cycles’ and those lasting 20-40 quarters – ‘classical cycles’. The value added of this article is the consideration of the two different type of cycles in light of the same methods of extraction, while to date they have been thought of as the ones that can be analysed with use of different methods of extraction. Another innovation is comparison of the cyclicality of different macroeconomic indicators from the point of view of the two types of cycles, while to date they have been analysed in the light of a single business cycle. In the article it is shown that dividing business cycles into such defined classical cycles and growth cycles enables us to understand the differences between the cyclicality of various macroeconomic aggregates and countries. It also enables us to distinguish between smaller downturns and severe recessions. Another conclusion is that the duration of contemporary business cycles around the world closes in a range of 2 to 10 years.

  10. On the Sources of Business Cycles:Implications for DSGE Models

    Andrle, Michal; Brůha, Jan; Solmaz, Serhat


    What are the drivers of business cycle fluctuations? And how many are there? By documenting strong and predictable co-movement of real variables during the business cycle in a sample of advanced economies, we argue that most business cycle fluctuations are driven by one major factor. The positive co-movement of real output and inflation convincingly argues for a demand story. This feature—robust across time and space—provides a simple smell test for structural macroeconomic models. We propose...

  11. Is Theory Really Ahead of Measurement? Current Real Business Cycle Theories and Aggregate Labor Market Fluctuations

    Lawrence J. Christiano; Martin Eichenbaum


    In the l93Os, Dunlop and Tarshis observed that the correlation between hours and wages is close to zero. This classic observation has become a litmus test by which macroeconomic models are judged. Existing real business cycle models fail this test dramatically. Based on this result, we argue that technology shocks cannot be the sole impulse driving post-war U.S. business cycles. We modify prototypical real business cycle models by allowing government spending shocks to influence labor market ...

  12. Business Cycle Synchronization Between Australia and New Zealand

    Jie Wei


    Full Text Available There has been a high degree of economic and financial integration between Australia and New Zealand with free trade agreements linking the capital and labor markets. Given a strong economic relationship, business-cycle transmission is expected to exist between the two countries. By analyzing the shock-transmission channels via trade, monetary policy, and exchange rates between Australia and New Zealand we can infer that if Australia and New Zealand trade less, have more similar monetary policy structure, or have less similar economic structures they would have stronger economy correlation. The results also show that the highly integrated banking system between Australia and New Zealand is an additional avenue for shock transmission between both countries.

  13. Political Business Cycle on the Agricultural Supports in Turkey

    M. Burak ONEMLI


    Full Text Available This study investigates whether there is a political business cycle (PBC on the agricultural supports in the Turkish economy. In this respect, we investigate the policies of different Turkish governments for the agricultural supports measured by the producer support estimates for the period 1986-2011. To this end, first the series for the producer support estimates are filtered by the Hodrick-Prescott filter, and then an econometric model is employed to estimate the effects of a set of explanatory variables including the economic crisis, the opportunistic and the partisan characteristics of the incumbent parties. Our results provide limited support for the opportunistic type PBC. Moreover, it seems that some Turkish governments have created the partisanship type PBCs

  14. Business Cycle and Risk Premium in the Colombian Stock Market

    Andrés Mauricio Gómez Sánchez


    Full Text Available Through the Hodrick-Prescott methodology this paper presents a review about the relationship between the ex post risk premium of the stock market and business cycles observed in Colombia. Through quarterly information from the fourth quarter of 2001 to the third quarter of 2012, statistical evidence shows that the increase and decrease of ex post risk premium follow a countercyclical behavior in tune with existing research conducted about the United States and emerging economies, although with non-contemporary relationships with private consumption. In addition, it is found that in the last decade the Colombian risk premium follows a process of Auto Regressive Moving Average Models (ARMA, showing that there is no variation in at least two consecutive quarters and whose behavior is generated in part by external events at the domestic economic activity level experienced in near past periods.

  15. Cycle e-business: the e-business of Gaz De France; Cycle e-business: l'e-business de Gaz de France



    This paper deals with the Gaz De France Group position in the e-business context. In terms of e-business, all is done to put Internet at the marketing service. Three examples of Internet sites realization and the future policy are presented. (A.L.B.)

  16. Are international business cycles different under fixed and flexible exchange rate regimes?

    Michael A. Kouparitsas


    A major concern surrounding European Monetary Union is that output fluctuations of member countries may become more volatile under a common currency because they will have increased sensitivity to foreign business cycles. This article analyzes the link between exchange rate regimes and the behavior of international business cycles.

  17. A Simple Model to Teach Business Cycle Macroeconomics for Emerging Market and Developing Economies

    Duncan, Roberto


    The canonical neoclassical model is insufficient to understand business cycle fluctuations in emerging market and developing economies. The author reformulates the model proposed by Aguiar and Gopinath (2007) in a simple setting that can be used to teach business cycle macroeconomics for emerging market and developing economies at the…

  18. Integrated Application of the Target Co-sting and Life Cycle Costing in Contemporary Business Environment

    Perčević, Hrvoje; Mirjana HLADIKA; Mićin, Marina


    Contemporary business environment is characterized by frequent changes in business conditions. Technological innovations and changes in customers’ perception affect on the continuous improvement in quality, availability and functionality of the product. According to this, product life cycle is significantly reduced over time, so business entities are trying to deal with these changes. Due to this, business entities have to produce new products in very short time, but at ...

  19. Exercise, physical activity, and exertion over the business cycle.

    Colman, Gregory; Dave, Dhaval


    Shifts in time and income constraints over economic expansions and contractions would be expected to affect individuals' behaviors. We explore the impact of the business cycle on individuals' exercise, time use, and total physical exertion, utilizing information on 112,000 individual records from the 2003-2010 American Time Use Surveys. In doing so, we test a key causal link that has been hypothesized in the relation between unemployment and health, but not heretofore assessed. Using more precise measures of exercise (and other activities) than previous studies, we find that as work-time decreases during a recession, recreational exercise, TV-watching, sleeping, childcare, and housework increase. This, however, does not compensate for the decrease in work-related exertion due to job-loss, and total physical exertion declines. These effects are strongest among low-educated men, which is validating given that employment in the Great Recession has declined most within manufacturing, mining, and construction. We also find evidence of intra-household spillover effects, wherein individuals respond to shifts in spousal employment conditional on their own labor supply. The decrease in total physical activity during recessions is especially problematic for vulnerable populations concentrated in boom-and-bust industries, and may have longer-term effects on obesity and related health outcomes. PMID:23906116

  20. Business cycles and the financial performance of fuel cell companies

    Fuel cells are expected to play a major role in a hydrogen powered world. They will provide power to homes, modes of transportation and appliances. Hydrogen is the most abundant element in nature, but it must be extracted in order to be usable. It can be produced from oil, natural gas and coal or from renewable sources such as biomass, thermal or nuclear reactions. Fuel cells running on hydrogen extracted from non renewable resources have an efficiency of 30 per cent, which is twice as efficient as an internal combustion engine. The greatest barrier to mass commercialization is the cost of making hydrogen-powered auto engines. Also, an infrastructure must be developed to refill hydrogen cars. One solution is to build a hydrogen highway using the existing natural gas grid to produce hydrogen and sell it at existing filling stations. The cost of building 12,000 refueling pumps in urban areas which will provide access to 70 per cent of America's population is estimated at $10 to $15 billion. This paper described the vector autoregression (VAR) model which empirically examines the relationship between financial performance of fuel cell companies and business cycles. It was used to measure how sensitive the financial performance of fuel cell companies are to changes in macroeconomic activity. A four variable VAR model was developed to examine the relationship between stock prices, oil prices and interest rates. It was shown that the stock prices of fuel cell companies are affected by shocks to technology stock prices and oil prices, with the former having a longer lasting impact. These results add to the growing literature that oil price movements are not as important as once thought. 15 refs., 3 tabs., 3 figs

  1. Oil prices and the U.S. business cycle

    The recent surge in oil prices rakes up old fears and the spectre of stagflation hangs over worldwide economic growth's forecasts. After 30 years of research however analysts still disagree about the influence of oil prices on macro-economic variations and the estimations of the consequences of a costlier barrel differ. As to the United States for example, elasticities between real GDP and oil price form a wide spectrum stretching from a value close to -1% to -11,6%. In this context, we try to identify the potential sources of instability in the oil price-macro-economy relationship in order to explain the width of this range. First we draw attention to the distinction between the effects of an upward disequilibrium and of an upturn in the equilibrium in the oil price series. This distinction lets us share the range of published results in two parts: the elasticities of real American GDP with respect to an upward imbalance and with respect to a rise in the equilibrium price would lie approximately in the ranges extending, respectively, from -1% to -5,5% and from -5% to -11,6%. We direct our work towards the analysis of the consequences of short-run variations in the oil prices on the U.S. business cycle. We identify a set of influences which condition the vulnerability of an economy and then construct an econometric sectoral and non-linear model inspired from Marshall's theory. The simulations conducted let us explain the long-run weakening in the oil price-macro-economy relationship and highlight the prominent part played by imported inflation and monetary policy in the crisis of the 70's and 80's. According to the values of the structural factors in the model and to the shape of the oil price short-run disequilibrium, the elasticities evaluated cover the whole range of published elasticities. (author)

  2. Life Cycle-Based Generic Business Strategies for Sustainable Business Models

    Yoon-Young Chun; Kun-Mo Lee


    The need to transition to a more sustainable economy is one of the most significant challenges society has ever faced. Despite the evidence that adopting a more sustainable business model is linked to more stable profits, many conventional manufacturers do not know where to begin. This study aims to identify generic business strategies that conventional manufacturers can use to improve their business models and thus be more sustainable and/or develop new sustainable business models. In order ...

  3. International business cycle synchronization since the 1870s: Evidence from a novel network approach

    Antonakakis, Nikolaos; Gogas, Periklis; Papadimitriou, Theophilos; Sarantitis, Georgios Antonios


    In this study, we examine the issue of business cycle synchronization from a historical perspective in 27 developed and developing countries. Based on a novel complex network approach, the Threshold-Minimum Dominating Set (T-MDS), our results reveal heterogeneous patterns of international business cycle synchronization during fundamental globalization periods since the 1870s. In particular, the proposed methodology reveals that worldwide business cycles de-coupled during the Gold Standard, though they were synchronized during the Great Depression. The Bretton Woods era was associated with a lower degree of synchronization as compared to that during the Great Depression, while worldwide business cycle synchronization increased to unprecedented levels during the latest period of floating exchange rates and the Great Recession.

  4. Risk and capital adjustment over the business cycle: Evidence from Indian banks

    Ghosh, Saibal


    Employing data on Indian banks for 1997-2006, we test the behavior of capital buffers over the business cycle. The evidence indicates that capital buffers exhibit pro-cyclical behavior, although the implied effects are small.

  5. The impact of the global financial crisis on business cycles in Asian emerging economies

    Fidrmuc, Jarko; Korhonen, Iikka


    We analyze the transmission of global financial crisis to business cycles in China and India. The pattern of business cycles in emerging Asian economies generally displays a low degree of synchronization with the OECD countries, which is consistent with the decoupling hypothesis. By contrast, however, the current financial crisis has had a significant effect on economic developments in emerging Asian economies. Applying dynamic correlations, we find wide differences for different frequencies ...

  6. Business Cycle Accounting: Bulgaria after the introduction of the currency board arrangement (1999-2014)

    Vasilev, Aleksandar


    This paper focuses on explaining the economic fluctuations in Bulgaria after the introduction of the currency board arrangement in 1997, the period of macroeconomic stability that ensued, the EU accession, and the episode of the recent global financial crisis. This paper follows Chari et al. (2002) and performs business cycle accounting (BCA) for Bulgaria during the period 1999-2014. As in Cavalcanti (2007), who studies the Portuguese business cycles, most of the volatility in output per capi...

  7. Evaluation of Uncertainty on the Stages of Business Cycle: Implementation of Quantum Principles

    Anna Svirina; Elena Parfenova; Elena Shurkina


    The goal of the research is to propose implementation of quantum principles for evaluation of economic development on stages of business cycle, define the difference between traditional (deterministic) and quantum approaches and to provide quantitative analysis based argumentation for use of quantum economic principles in evaluation of internal and external factors on the stages of business cycle. The object of the study is possibility and reliability of quantum economic principles implementa...

  8. The Contribution of Economic Indicator Analysis to Understanding and Forecasting Business Cycles

    Ernst A. Boehm


    This paper reviews major features of the development of economic indicator analysis (EIA), notably its contribution to identifying, understanding, explaining and forecasting business cycles. The paper highlights the substantial pioneering role of Dr Geoffrey H. Moore in this development. The paper reviews some key issues regarding the selection and classification of economic indicators; and the methodologies developed to use these indicators to identify and measure business cycles on national...

  9. Computing Markov-perfect optimal policies in business-cycle models

    Dennis, Richard; Kirsanova, Tatiana


    Time inconsistency is an essential feature of many policy problems. This paper presents and compares three methods for computing Markov-perfect optimal policies in stochastic nonlinear business cycle models. The methods considered include value function iteration, generalized Euler equations, and parameterized shadow prices. In the context of a business cycle model in which a fiscal authority chooses government spending and income taxation optimally, although lacking the ability to commit, we...

  10. A Repayment Model of House Prices Oil Price Dynamics in a Real Business Cycle Model

    Vipin Arora; Pedro Gomis-Porqueras


    We show the importance of endogenous oil prices and production in the real business cycle framework. Endogenising these variables improves the model's predictions of business cycle statistics, oil related and non-oil related, relative to a situation where either is exogenous. This result is robust to the standard extensions (variable capacity utilisation and monopolistic competition) used in the literature. In particular, we first show that with either exogenous oil prices or production the s...

  11. Business Cycle Properties of Selected U.S. Economic Time Series, 1959-1988

    James H. Stock; Mark W. Watson


    This paper catalogs the business cycle properties of 163 monthly U.S. economic time series over the three decades from 1959 through 1988. Two general sets of summary statistics are reported. The first set measures the comovement of each individual time series with a reference series representing real economic activity. These statistics focus on comovements at business cycle horizons. The second set of statistics examines the predictive content of each of the series for aggregate activity, rel...

  12. Trade flows as a channel for the transmission of business cycles

    Berk, J.M.


    The interdependence between business cycles of different countries has grown in recent decades. Many factors act as conductors of cyclical fluctuations between countries. In this context, the influence of trade flows in the global transmission of business cycles is examined. The author aims to identify empirically the line of causality of international cyclical movements as suggested by trade flows, presenting an estimate of the quantitive importance of trade flows as transmission channel.

  13. An Analysis Of Political Business Cycle Theory and its Relationship with the New Political Macroeconomics

    Dean Garratt


    The paper analyses the four principal model types that comprise the political business cycle literature. It then considers how this literature complements the ‘new political macroeconomics’ in analysing the impact of politics on inflation. Political business cycle models can be classified according to the political motivations of opportunism and ideology as well as by the way in which individuals form expectations. Using this classifications we pay particular attention to the underlying assum...

  14. Regional business cycles in New Zealand:Do they exist? What might drive them?

    Viv B Hall; John, McDermott C.


    We use National Bank of New Zealand Regional Economic Activity data, to identify and characterise classical business cycle turning points, for New Zealand’s 14 regions and aggregate New Zealand activity. Using Concordance statistic measures, logistic model and GMM estimation methods, meaningful regional business cycles have been identified and a number of significant associations established. All regions exhibit cyclical asymmetry for both durations and amplitudes, and synchronisations betwee...

  15. The Cross-Sectional Dynamics of German Business Cycles: A Bird´s Eye View

    Döpke, Jörg; Funke, Michael; Holly, Sean; Weber, Sebastian


    We establish some stylised facts for Germany's business cycle at the level of the firm. Based on longitudinal firm-level data from the Bundesbank's balance sheet statistic covering, on average, 55,000 firms per year from 1971 to 1998, we analyse the reallocation across individual producers and, in turn, the connection of this reallocation to aggregate business cycles. The empirical results indicate a pronounced heterogeneity of real sale changes across firms. Moreover, the distribution of gro...

  16. Forecasting macro variables with a Qual VAR business cycle turning point index

    Dueker, Michael J.; Katrin Wesche


    One criticism of VAR forecasting is that macroeconomic variables tend not to behave as linear functions of their own past around business cycle turning points. This article investigates the methods and efficacy of forecasting with a VAR that expands the information set to include dynamic forecasts of a qualititative variable - business cycle turning points. We apply this Qual VAR model to five of the G7 economies and find that the Qual VAR improves on forecasts from standard models, both for ...

  17. Dynamics of Business Cycles in Vietnam: A comparison with Indonesia and Philippines

    Le, Ha


    Abstract: The objective of this paper is to analyze the dynamics of business cycle features and investigate the main source of macroeconomic fluctuations in Vietnam, and then make comparison to Indonesia and the Philippines. In the first task, the business cycle features are evaluated by properties of data, including volatility, persistence and co-movement after taking Hodrick-Prescott (HP) filter in 2 periods: before and after the global financial crisis in 2008. Results indicate that these ...

  18. Analysis of stochastic effects in Kaldor-type business cycle discrete model

    Bashkirtseva, Irina; Ryashko, Lev; Sysolyatina, Anna


    We study nonlinear stochastic phenomena in the discrete Kaldor model of business cycles. A numerical parametric analysis of stochastically forced attractors (equilibria, closed invariant curves, discrete cycles) of this model is performed using the stochastic sensitivity functions technique. A spatial arrangement of random states in stochastic attractors is modeled by confidence domains. The phenomenon of noise-induced transitions "chaos-order" is discussed.

  19. A Contribution to the Austrian Business Cycle Theory: Uncertainty and Price Expectations

    Frömmel, Tomáš


    Common critique of the Austrian business cycle theory states that the Austrian cycle could not be initiated under the rational expectations hypothesis. This thesis therefore investigates the role of price expectations of entrepreneurs in the Austrian cycle theory. We conclude that this theory might be compatible with rational expectations only under several assumptions. The rational expectations hypothesis is, however, evaluated rather critically concluding it is quite strong and unrealistic ...

  20. Relationship finance, market finance and endogenous business cycles

    Deidda, Luca Gabriele; Fattouh, Bassam


    This paper develops an overlapping generation model with asymmetric information in the credit market such that the interplay between relationship finance supplied by investors who monitor investment decisions ex-ante and market finance supplied by investors who relay on public information can be the source of endogenous business fluctuations. Monitoring helps reducing the inefficiency caused by moral hazard. However, the incentives of entrepreneurs to demand relationship finance to induce mon...

  1. Innovation budgeting over the business cycle and innovation performance

    Hud, Martin; Rammer, Christian


    The global economic crisis of 2008/2009 hit many firms hard. Faced with rapidly declining sales and highly uncertain economic prospects, firms had to cut costs and reconsider their business strategies. With respect to innovation, cost cutting often means to stop or underresource innovation projects which may harm a firm’s long-term competitiveness. Firms may therefore refrain from reducing innovation budgets during crises but rather deliberately allocate more resources to innov...

  2. Do Institutions and Culture Matter for Business Cycles?

    Altug, Sumru; Canova, Fabio


    We examine the relationship between macroeconomic, institutional, and cultural indicators and cyclical fluctuations for European, Middle Eastern and North African Mediterranean countries. Mediterranean cycles are different from EU cycles: the duration of expansions is shorter; the amplitude and the output costs of recessions are larger; and cyclical synchronization is smaller. Differences in macroeconomic and institutional indicators partly account for the relative differences in cyclical syn...

  3. Accounting Spanish business cycles: What can be learned from past recessions?

    Jesús Rodríguez López; Mario Solís-García


    We apply the business cycle methodology proposed by Chari, Kehoe, and McGrattan (2007) to identify the sources of Spanish business fluctuations during two outstanding cyclical episodes: the recession alongside the inception of democracy on 1977, and the recession of 2008. We find that the labor wedge is the key element behind these fluctuations, and that both taxes and labor market institutions are likely behind the wedge movements. Our conclusion suggests that any model that tries to underst...

  4. The Link Between Firms? Innovation Decision and the Business Cycle: An Empirical Analysis

    Heger, Diana


    The sensitivity of innovation activities with respect to the business cycle is often assumed to be small. In this paper the hypothesis on cyclical dependence of innovation activities is tested for firms in the German manufacturing, and additionally for SMEs. To this end firms' innovation decisions are considered. The decision to innovate in one period is modelled via a first-order Markov chain approach. The results suggest that the patterns in innovative behavior are linked to the business cy...

  5. Welfare Cost of Business Cycles with Idiosyncratic Consumption Risk and a Preference for Robustness

    Martin Ellison; Sargent, Thomas J.


    The welfare cost of random consumption fluctuations is known from De Santis (2007) to be increasing in the level of uninsured idiosyncratic consumption risk. It is known from Barillas, Hansen, and Sargent (2009) to increase if agents care about robustness to model misspecification. We calculate the cost of business cycles in an economy where agents face idiosyncratic consumption risk and fear model misspecification, finding that idiosyncratic risk has a greater impact on the cost of business ...

  6. Economic intermittency in a two-country model of business cycles coupled by investment

    Highlights: → Intermittent economic behavior of Keynes-Goodwin type model is investigated. → After a transition the system keeps its memory before the transition. → The intermittent phenomena is examined from the business cycle patterns. → It is concluded that dynamical patterns do not alter much around the transition. - Abstract: Intermittent behavior of economic dynamics is investigated by a two-country model of Keynes-Goodwin type business cycles. Numerical simulations show that after an economic system evolves from weak chaos to strong chaos the system keeps its memory before the transition and its time series alternates episodically between periods of weakly and strongly chaotic fluctuations. In addition, we examine the intermittent phenomena from the view point of business cycle patterns near the crisis point.

  7. Idiosyncratic Uncertainty, Capacity Utilization and the Business Cycle

    Fragnart, Jean-Francois; Licandro, Omar; Portier, Franck

    thus hides a diversity of microeconomic situations. The variablity of the capacity utilization allows for a good description of some of the main stylized facts of the busines cycle, propagates and magnifies aggregate technological shocks and generates endogenous persistence (i.e., the output growth...

  8. The role of real and nominal variables in defining business cycles: dynamic properties of a hybrid model - an alternative view

    Themba G. Chirwa


    The paper provides an alternative view to the Real and New Keynesian business cycle theories. The paper focuses on the combination of both real and nominal variables in explaining the cyclical movements of business cycles. We propose using Vector Autoregressive (VAR) technique on the production function approach in order to empirically assess the relative importance of both real and nominal variables in defining the shape of a business cycle (or output gap). An economy-specific variable (infl...

  9. Advertising Expenditures Interaction with Business Cycles and Firm Value: An Empirical Analysis with US Companies

    Graziela Fortunato


    Full Text Available This study aims to verify the contribution of advertising expendituresto firm value. To reach this goal, we considered business cycles, which follow a stochastic process and may influence the decision as to the amount to be spent in advertising. With the optimization of these expenditures under the business cycle effect, it is, in fact, possible to analyze whether the results positively contribute to firm value. Data from US companies of the consumer staples sector from 1997 to 2008 were employed to test the proposed model through multiple regression and panel data. The results indicate favorable evidences which confirm the proposed model.


    Rodrigo Salvador


    Full Text Available The growing concern about the development of sustainable production systems leads organizations to seek the support of management tools for decision-making. Considering the whole life cycle of the product, the Life Cycle Assessment (LCA has an important role in this scenario. The objective of this paper is to present, through the theoretical discussion, the role of LCA in strategic planning of the organization. It showed the enormous potential for decision making on the environmental aspect, but also the critical factor in the development shares in the competitive context. The use of LCA can reduce the environmental impacts of the system under study (primary purpose and guide the range of advantages in the fields of marketing, legislation and environmental labeling, competitive strategies, efficiency use of resources and others.

  11. The US business cycle: power law scaling for interacting units with complex internal structure

    Ormerod, Paul


    In the social sciences, there is increasing evidence of the existence of power law distributions. The distribution of recessions in capitalist economies has recently been shown to follow such a distribution. The preferred explanation for this is self-organised criticality. Gene Stanley and colleagues propose an alternative, namely that power law scaling can arise from the interplay between random multiplicative growth and the complex structure of the units composing the system. This paper offers a parsimonious model of the US business cycle based on similar principles. The business cycle, along with long-term growth, is one of the two features which distinguishes capitalism from all previously existing societies. Yet, economics lacks a satisfactory theory of the cycle. The source of cycles is posited in economic theory to be a series of random shocks which are external to the system. In this model, the cycle is an internal feature of the system, arising from the level of industrial concentration of the agents and the interactions between them. The model-in contrast to existing economic theories of the cycle-accounts for the key features of output growth in the US business cycle in the 20th century.

  12. International and Domestic Business Cycles as Dynamics of a Network of Networks

    Ikeda, Yuichi; Iyetomi, Hiroshi; Aoyama, Hideaki; Yoshikawa, Hiroshi


    Synchronization in business cycles has attracted economists and physicists as self-organization in the time domain. From a different point of view, international and domestic business cycles are also interesting as dynamics of a network of networks or a multi-level network. In this paper, we analyze the Indices of Industrial Production monthly time-series in Japan from January 1988 to December 2007 to develop a deeper understanding of domestic business cycles. The frequency entrainment and the partial phase locking were observed for the 16 sectors to be direct evidence of synchronization. We also showed that the information of the economic shock is carried by the phase time-series. The common shock and individual shocks are separated using phase time-series. The former dominates the economic recession in all of 1992, 1998 and 2001. In addition to the above analysis, we analyze the quarterly GDP time series for Australia, Canada, France, Italy, the United Kingdom, and the United States from Q2 1960 to Q1 2010 in order to clarify its origin. We find frequency entrainment and partial phase locking. Furthermore, a coupled limit-cycle oscillator model is developed to explain the mechanism of synchronization. In this model, the interaction due to international trade is interpreted as the origin of the synchronization. The obtained results suggest that the business cycle may be described as a dynamics of the multi-level coupled oscillators exposed to random individual shocks.

  13. A fourth order spline collocation approach for a business cycle model

    Sayfy, A.; Khoury, S.; Ibdah, H.


    A collocation approach, based on a fourth order cubic B-splines is presented for the numerical solution of a Kaleckian business cycle model formulated by a nonlinear delay differential equation. The equation is approximated and the nonlinearity is handled by employing an iterative scheme arising from Newton's method. It is shown that the model exhibits a conditionally dynamical stable cycle. The fourth-order rate of convergence of the scheme is verified numerically for different special cases.

  14. The insurance business and the nuclear fuel cycle

    The legally required financial security is provided by the insurance business by way of liability insurance systems. Insurance coverage is given for the obligation to pay damages in compliance with section 13 Atomic Energy Act, which refers to all objects of legal protection also defined in section 823, sub-sec. (1) BGB. The legal provisions valid in the F.R.G. are very similar to the provisions in most western countries. They comply with the Paris Convention which determines the legal bases of the international third party liability system which have been supplemented by the Brussels Convention. The reactor accident at Chernobyl has induced discussions and changes in the insurance sector. A major conclusion was that liability criteria must have unambiguous definition and delimitation. A compensation system is feasible only on the basis of clear-cut definitions. A first step in this direction has been done by issuing maximum permissible limits for foodstuffs. Another major instrument for coping with a nuclear accident is the distribution scheme defined in section 35 Atomic Energy Act. (orig./HSCH)

  15. Evaluation of Uncertainty on the Stages of Business Cycle: Implementation of Quantum Principles

    Anna Svirina


    Full Text Available The goal of the research is to propose implementation of quantum principles for evaluation of economic development on stages of business cycle, define the difference between traditional (deterministic and quantum approaches and to provide quantitative analysis based argumentation for use of quantum economic principles in evaluation of internal and external factors on the stages of business cycle. The object of the study is possibility and reliability of quantum economic principles implementation to evaluate economic system performance. The authors analyze existing approaches towards implementation of deterministic, probabilistic and quantum models for estimating internal and external factors on stages of business cycle, define the benchmark for shift from traditional economy models and principles to quantum principles, describe the stages of business cycle from the quantum economics point of view and provide quantitative analysis of deterministic and quantum models quality on the level of enterprise to prove efficiency and reliability of quantum principles based approach. Calculations and data processing were carried out using Microsoft Excel and SSPS Statistics software.

  16. Money velocity in an endogenous growth business cycle with credit shocks

    Benk, S.; Gillman, M.; Kejak, Michal

    -, 2007/5 (2007), s. 1-17. ISSN 1585-5600 R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:MSM0021620846 Keywords : money velocity * business cycle * credit shocks Subject RIV: AH - Economics

  17. Money velocity in an endogenous growth business cycle with credit shocks

    Benk, S.; Gillman, M.; Kejak, Michal


    Roč. 40, č. 6 (2008), s. 1281-1293. ISSN 0022-2879 R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:AV0Z70850503 Keywords : money velocity * business cycle * credit shocks Subject RIV: AH - Economics Impact factor: 1.422, year: 2008

  18. Effectively Serving the Needs of Today's Business Student: The Product Life Cycle Approach to Class Organization

    Eastman, Jacqueline K.; Aviles, Maria; Hanna, Mark


    We illustrate a class organization process utilizing the concept of the Product Life Cycle to meet the needs of today's millennial student. In the Introduction stage of a business course, professors need to build structure to encourage commitment. In the Growth stage, professors need to promote the structure through multiple, brief activities that…

  19. How Business Cycles Affect the Healthcare Sector: A Cross-country Investigation.

    Cleeren, Kathleen; Lamey, Lien; Meyer, Jan-Hinrich; De Ruyter, Ko


    The long-term relationship between the general economy and healthcare expenditures has been extensively researched, to explain differences in healthcare spending between countries, but the midterm (i.e., business cycle) perspective has been overlooked. This study explores business cycle sensitivity in both public and private parts of the healthcare sector across 32 countries. Responses to the business cycle vary notably, both across spending sources and across countries. Whereas in some countries, consumers and/or governments cut back, in others, private and/or public healthcare buyers tend to spend more. We also assess long-term consequences of business cycle sensitivity and show that public cost cutting during economic downturns deflates the mortality rates, whereas private cut backs increase the long-term growth in total healthcare expenditures. Finally, multiple factors help explain variability in cyclical sensitivity. Private cost cuts during economic downturns are smaller in countries with a predominantly publicly funded healthcare system and more preventive public activities. Public cut backs during contractions are smaller in countries that rely more on tax-based resources rather than social health insurances. Copyright © 2015 John Wiley & Sons, Ltd. PMID:25916435

  20. The role of national culture in advertising's sensitivity to business cycles : An investigation across continents

    Deleersnyder, B.; DeKimpe, M.; Steenkamp, J.E.M.; Leeflang, P.S.H.


    The authors conduct a systematic investigation into the cyclical sensitivity of advertising expenditures in 37 countries, covering four key media: magazines, newspapers, radio, and television. They show that advertising is considerably more sensitive to business-cycle fluctuations than the economy a

  1. Money velocity in an endogenous growth business cycle with credit shocks

    Benk, S.; Gillman, M.; Kejak, Michal

    -, CDMC06/04 (2006), s. 1-39 Institutional research plan: CEZ:AV0Z70850503 Keywords : money velocity * business cycle * endogenous growth Subject RIV: AH - Economics and economics /CDMA/papers/cp0604.pdf

  2. Money velocity in an endogenous growth business cycle with credit shocks

    Benk, S.; Gillman, M.; Kejak, Michal

    -, E2007/14 (2007), s. 1-16. ISSN 1749-6101 Institutional research plan: CEZ:MSM0021620846 Keywords : money velocity * business cycle * credit shocks Subject RIV: AH - Economics


    Mester Ioana


    Full Text Available If the more or less regulate moves of the macroeconomic variables are accepted by the economists as a reality, the problem of measuring the aggregate level of the economy in direct correlation with these fluctuations is much more difficult due to the numerous variables involved. The way these variables move in time is very different from a period to another as well as from a country to another. While some variables have already reached their maximum level, others are on their descendent slope. This is the reason why the measurement problem of the aggregate level of the macroeconomic activity deserves our attention. Finding the patterns macroeconomic variables move together and influence each other is important both as a theoretical challenge, but for its practical utility as well. Depending on the result of the measurement process, the authorities are able to conduct their economic policies. More precisely, the monetary or fiscal authority will act differently if the economy is in recession or in expansion. These are the reasons for which a very important phase in the study of the cycle is its descriptive analysis, which is realized by focusing on certain aspects, such as: the length and magnitude, the correlation of the economic variables with the reference series, the study of the cyclical indicators, the analysis of the relative variability of economic series, the diagnose and prevision based on the cyclical indicators.

  4. Out-of-sample Performance of Leading Indicators for the German Business Cycle: Single vs. Combined Forecasts

    Christian Dreger; Christian Schumacher


    In this paper the forecasting performance of popular leading indicators for the German business cycle is investigated. Survey based indicators (ifo business climate, ZEW index of economic sentiment) and composite leading indicators (Handelsblatt, Frankfurter Allgemeine Zeitung, Commerzbank) are considered. The analysis points to a significant relationship of the indicators to the business cycle within the sample period, as measured by the direction of causality. But, their out-of-sample forec...

  5. A novel PPGA-based clustering analysis method for business cycle indicator selection

    Dabin ZHANG; Lean YU; Shouyang WANG; Yingwen SONG


    A new clustering analysis method based on the pseudo parallel genetic algorithm (PPGA) is proposed for business cycle indicator selection. In the proposed method,the category of each indicator is coded by real numbers,and some illegal chromosomes are repaired by the identi-fication arid restoration of empty class. Two mutation op-erators, namely the discrete random mutation operator andthe optimal direction mutation operator, are designed to bal-ance the local convergence speed and the global convergence performance, which are then combined with migration strat-egy and insertion strategy. For the purpose of verification and illustration, the proposed method is compared with the K-means clustering algorithm and the standard genetic algo-rithms via a numerical simulation experiment. The experi-mental result shows the feasibility and effectiveness of the new PPGA-based clustering analysis algorithm. Meanwhile,the proposed clustering analysis algorithm is also applied to select the business cycle indicators to examine the status of the macro economy. Empirical results demonstrate that the proposed method can effectively and correctly select some leading indicators, coincident indicators, and lagging indi-cators to reflect the business cycle, which is extremely op-erational for some macro economy administrative managers and business decision-makers.

  6. Production sharing and real business cycles in a small open economy

    Jose Joaquin Lopez


    Production sharing and vertical specialization account for a significant share of trade between developed and developing countries. The Mexican maquiladora industry provides an ideal example of production sharing in a small open economy. The typical "maquila" imports most of its inputs from and exports all its output to the United States.> ; This article tries to determine to what extent production sharing, as in the Mexican maquiladora, can serve as a transmission mechanism of business cycle...

  7. Credit spread variability in U.S. business cycles: The Great Moderation versus the Great Recession

    Hylton Hollander and Guangling Liu


    This paper establishes the prevailing financial factors that influence credit spread variability, and its impact on the U.S. business cycle over the Great Moderation and Great Recession periods. To do so, we develop a dynamic general equilibrium framework with a central role of financial intermediation and equity assets. Over the Great Moderation and Great Recession periods, we find an important role for bank market power (sticky rate adjustments and loan rate markups) on credit spread variab...

  8. Credit spread variability in U.S. business cycles: the Great Moderation versus the Great Recession

    Hylton Hollander; Guangling (Dave) Liu


    This paper establishes the prevailing financial factors that influence credit spread variability, and its impact on the U.S. business cycle over the Great Moderation and Great Recession periods. To do so, we develop a dynamic general equilibrium framework with a central role of financial intermediation and equity assets. Over the Great Moderation and Great Recession periods, we find an important role for bank market power (sticky rate adjustments and loan rate markups) on credit spread variab...

  9. The Life Cycle of Small-firm Networks: An Evaluation of Brazilian Business Networks

    Douglas Wegner; Rejane Maria Alievi; Heron Sérgio Moreira Begnis


    Interorganizational agreements and cooperative business networks became an important strategy for companies facing competitive disadvantages. Specially small and medium firms adopted collaborative network models as a way to overcome common problems. Over 1,000 small-firm networks (SFNs) are estimated to have been created in Brazil since the year 2000. This study aimed to propose a SFNs life cycle model, applying it to a sample of twenty-eight SFNs established in two regions of sou...

  10. Applying shape and phase restrictions in generalized dynamic categorical models of the business cycle

    Don Harding


    To match the NBER business cycle features it is necessary to employ Gen- eralised dynamic categorical (GDC) models that impose certain phase re- strictions and permit multiple indexes. Theory suggests additional shape re- strictions in the form of monotonicity and boundedness of certain transition probabilities. Maximum likelihood and constraint weighted bootstrap esti- mators are developed to impose these restrictions. In the application these estimators generate improved estimates of how th...

  11. The 2001 recession and the Chicago Fed National Index: identifying business cycle turning points

    Evans, Charles L.; Chin Te Liu; Genevieve Pham-Kanter


    The initial release of the Chicago Fed National Activity Index (CFNAI) in early 2001 pointed to the very real possibility that the U.S. economy was teetering on the brink of recession. This article quantifies the statistical ability of the CFNAI to act as an early warning indicator of economic recessions. In simulation experiments, the CFNAI performed virtually as well as the statistical model's ideal measure of the business cycle.

  12. Tackling Undeclared Work. Suggestions from a Business Cycle Model with Search Frictions

    Ciccarone Giuseppe; Giuli Francesco; Marchetti Enrico


    The paper evaluates the relative effect of deterrence, prevention, curative and commitment policy measures on the size of undeclared work in a real business cycle model with undeclared work, tax evasion and search frictions in the labour market. A numerical application of the model to the European economy shows that all these approaches reduce the undeclared share of output, but that deterrence and commitment policies also produce a negative effect on stationary employment. The curative appro...

  13. The Allocation of Talent over the Business Cycle and its Effect on Sectoral Productivity

    Michael Boehm; Martin Watzinger


    It is well documented that graduates enter different occupations in recessions than in booms. In this article, we examine the impact of this reallocation for long-term productivity and output across sectors. We develop a model in which talent flows to stable sectors in recessions and to cyclical sectors in booms. We find evidence for the predicted change in productivity caused by the business cycle in a setting where output can be readily measured: economists starting or graduating from their...

  14. State budgets and the business cycle: implications for the federal balanced budgets amendment debate

    Leslie McGranahan


    Balanced budgets and proponents often use the experience of the states with balanced budget restrictions as an argument in favor of a federal balanced budget amendment. However, the state experience is not directly relevant to the federal government. State restriction are more lenient than those considered at the federal level, and many of the techniques used by the states to blame their budgets over the business cycle are not available to the federal government.

  15. Disability, capacity for work and the business cycle: An international perspective

    Ben??tez Silva, Hugo; Disney, Richard; Jim??nez-Mart??n, Sergi


    An important policy issue in recent years concerns the number of people claiming disability benefits for reasons of incapacity for work. We distinguish between ?work disability?, which may have its roots in economic and social circumstances, and ?health disability? which arises from clear diagnosed medical conditions. Although there is a link between work and health disability, economic conditions, and in particular the ?business cycle? and variations in the risk of unemploymen...

  16. Environmental Concern and the Business Cycle: The Chilling Effect of Recession

    Kahn, Matthew E.; Kotchen, Matthew J


    This paper uses three different sources of data to investigate the association between the business cycle--measured with unemployment rates--and environmental concern. Building on recent research that finds internet search terms to be useful predictors of health epidemics and economic activity, we find that an increase in a state's unemployment rate decreases Google searches for "global warming" and increases searches for "unemployment," and that the effect differs according to a state's poli...

  17. What Causes Business Cycles? Analysis of the Japanese Industrial Production Data

    Hiroshi Iyetomi; Yasuhiro Nakayama; Hiroshi Yoshikawa; Hideaki Aoyama; Yoshi Fujiwara; Yuichi Ikeda; Wataru Souma


    We explore what causes business cycles by analyzing the Japanese industrial production data. The methods are spectral analysis and factor analysis. Using the random matrix theory, we show that two largest eigenvalues are significant. Taking advantage of the information revealed by disaggregated data, we identify the first dominant factor as the aggregate demand, and the second factor as inventory adjustment. They cannot be reasonably interpreted as technological shocks. We also demonstrate th...

  18. Accounting for the Great Recession in the UK: Real Business Cycles and Financial Frictions

    Jagjit S. Chadha; Warren, James


    Using the business cycle accounting (BCA) framework pioneered by Chari, Kehoe and McGratten (2006) we examine the 2008-09 recession in the UK. There has been much commentary on the financial causes of this recession, which we might have expected to shock the equation governing the intertemporal rate of substitution in consumption. However, the recession appears to have been mostly driven by shocks to the efficiency wedge in total production, rather than the intertemporal consumption, labour o...

  19. Foreign exchange intervention and the political business cycle: A panel data analysis

    Dreher, Axel; Vaubel, Roland


    By combining expansionary open market operations with sales of foreign exchange, the central bank can expand the monetary base without depreciating the exchange rate. Thus, if there is a monetary political business cycle, sales of foreign exchange are especially likely before elections. Our panel data analysis for up to 158 countries in 1975-2001 supports this hypothesis. Foreign exchange reserves relative to trend GDP depend negatively on the pre-election index regardless of the exchange rat...

  20. The Beat of the Economic Heart: Joseph Schumpeter and Arthur Spiethoff on Business Cycles

    Kurz, Heinz D.


    The paper discusses the relationship between Arthur Spiethoff and Joseph A. Schumpeter, the men and their works. Had it not been for Spiethoff Schumpeter would in all probability have forever been lost to scientific work. It was Spiethoff who brought the Austrian back to academia and research after a sequence of serious mishaps in politics and banking. Spiethoff's contribution to an analysis of business cycles is then summarized and important similarities and some differences between it and S...

  1. Bank-lending standards, loan growth and the business cycle in the Euro area

    Kaufmann, Sylvia; Scharler, Johann


    We study the relationship between bank lending standards, loan growth and the business cycle in the euro area and the US within a vector error correciton model using Bayesian estimation methods. To deal with the short data series available for the euro area, we exploit information from the estimated US system to improve the estimation of the euro area system. We find that tighter bank lending standards are associated with lower loan growth as well as lower output growth in both areas. Differe...

  2. Higher-Order Income Risk and Social Insurance Policy Over the Business Cycle

    Rocio Madera; Fatih Guvenen; David Domeij; Christopher Busch


    This paper studies how higher-order income risk varies over the business cycle as well as the extent to which such risks can be smoothed within households or with government social insurance policies. To provide a broad perspective on these questions, we study panel data on individuals and households from the United States, Germany, and Sweden, covering more than three decades of data for each country. We find that the underlying variation in higher-order risk is remarkably similar across the...

  3. The Housing Sector over Business Cycles:Empirical Analysis and DSGE Modelling

    Brůha, Jan; Polanský, Jiří


    In this paper, we analyse the dynamics of the housing sector over business cycles. First, we provide an empirical analysis of the relationships between housing sector data and the main macroeconomic variables both on Czech data and on a sample of advanced economies. We document that in most countries the housing sector co-moves with the rest of the economy. In the past, the Czech housing market showed temporary episodes during which the housing sector was seemingly disconnected, but since 200...

  4. Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe: Just Do It

    Flandreau, Marc; Maurel, Mathilde


    This Paper seeks to trace the impact of monetary arrangements on trade integration and business cycle correlation, focusing on Europe in the late 19th century period as a guide for modern debates. For this purpose, we first estimate a gravity model and show that monetary arrangements were associated with substantially higher trade. The Austro-Hungarian dual monarchy, by many aspects a forerunner of Euroland, improved trade between member states by a factor of 3. Other arrangements, such as th...

  5. Appendix: Business Cycle Implications of Internal Consumption Habit for New Keynesian Models

    Kano, Takashi; James M. Nason


    The appendix discusses computational aspects of the paper “Business Cycle Implications of Internal Consumption Habit for New Keynesian Models.” These topics range from solving the baseline new Keynesian dynamic stochastic general equilibrium (NKDSGE) model, estimating the structural infinite-order vector moving averages, checking whether these models recover the fundamental shocks, to computing the permanent and transitory output and consumption growth spectral densities. More evidence about ...

  6. A Pearson's test for symmetry with an application to the Spanish business cycle

    Jorge Belaire-Franch; Dulce Contreras


    In this paper, we look for asymmetries in the Spanish business cycle. To that end, we firstly propose an easy nonparametric testing procedure to test for symmetry based on a Pearson's chi-squared statistic, which we call P-test. Then, we test for two popular forms of asymmetry, deepness and steepness, using a battery of nonparametric tests. In addition, we analyse possible complementarities between the tests used in this paper, and we compute p-value adjustments for multiple tests.

  7. The International Risk-Sharing Puzzle is at Business Cycle and Lower Frequency

    Corsetti, Giancarlo; Dedola, Luca; Viani, Francesca


    We decompose the Backus-Smith [1993] statistic --- a low or negative correlation between relative consumption and the real exchange rate at odds with a high degree of international risk sharing --- in its dynamic components at different frequencies. Using multivariate spectral analysis techniques we show that, in most OECD countries, the dynamic correlation tends to be more negative, and significantly so, at business cycle or lower frequencies --- the appropriate frequencies for assessing the...

  8. Real Business Cycle Models of the Great Depression : a Critical Survey

    Pensieroso, Luca


    Recent years have witnessed a revival of interest in the Great Depression of the 1930s. Among the differing new interpretations, that of the real business cycle (RBC) is particularly significant. It represents an outstanding methodological innovation in trying to cast the Great Depression within an “equilibrium†framework. This paper critically reiews the RBC interpretation of the Great Depression, clarifying its theoretical and methodological foundations, and paving the way for future ass...

  9. Explicit solutions to a vector time series model and its induced model for business cycles

    Chen, Xiongzhi


    This article gives the explicit solution to a general vector time series model that describes interacting, heterogeneous agents that operate under uncertainties but according to Keynesian principles, from which a model for business cycle is induced by a weighted average of the growth rates of the agents in the model. The explicit solution enables a direct simulation of the time series defined by the model and better understanding of the joint behavior of the growth rates. In addition, the ind...


    Kahn, Matthew E.; Kotchen, Matthew J


    This paper uses two different sources of data to investigate the association between the business cycle — measured with unemployment rates — and public concern about climate change. Building on recent research that finds internet search terms to be useful predictors of health epidemics and economic activity, we find that an increase in a state's unemployment rate decreases Google searches for "global warming" and increases searches for "unemployment," and that the effect differs according to ...