business cycles
BUSINESS CYCLES
Trend and cycle of the business cycle
Phases of the cycle
Pro‐cyclical, counter‐cyclical, and a‐cyclical variables
Lead, lagged, and contemporary variables
Stylized facts and cyclical behavior of key macroeconomic variables
2
BUSINESS CYCLES
Over time GDP grows but not in a linear way
GDP 2006 constant prices (in logs)
6.5
6.3
6.1
5.9
5.7
5.5
5.3
5.1
4.9
4.7
4.5
3
BUSINESS CYCLES
Time Series Components
1.
2.
3.
4.
Trend (long‐run)
Cycle (short‐run)
Seasonality (short‐run, ex: monthly, quarterly)
Irregularities or random behavior
4
BUSINESS CYCLES
GDP and Trend (in logs)
6.5
6.3
6.1
5.9
5.7
5.5
5.3
5.1
4.9
4.7
4.5
5
BUSINESS CYCLES
Definition – Period between two peaks of the output gap. Short‐run fluctuations in economic activity, i.e., deviations from the long‐run trend. GDP Business Cycle (in logs)
0.08
1973
0.06
1990
0.04
1980
2000
2007
0.02
0
2003
‐0.02
1995
‐0.04
‐0.06
‐0.08
2009
1969
1976
1986
6
BUSINESS CYCLES
Phases of the Business Cycles
A cycle has two phases: One corresponds to the expansion which takes place simultaneously in many business activities, the following ...
Is a recession also covering many economic activities.
A technical definition of recession (NBER) ‐ two consecutive quarters of negative growth.
The expansion can be divided between recovery and prosperity. The recession may be divided between contraction (or crisis) and depression (term used only for very serious recessions). The cycle is reflected in the emergence of positive output gaps followed by negative output gaps. Positive gaps occur when the output is above the level of its trajectory trend.
Although recurrent, economic cycles come and go with varying amplitudes and duration. The duration of the cycles have varied over a year up to 10‐12 years.
7
BUSINESS CYCLES
Phases of the Business Cycle – The Role of
Trend and cycle of the business cycle
Phases of the cycle
Pro‐cyclical, counter‐cyclical, and a‐cyclical variables
Lead, lagged, and contemporary variables
Stylized facts and cyclical behavior of key macroeconomic variables
2
BUSINESS CYCLES
Over time GDP grows but not in a linear way
GDP 2006 constant prices (in logs)
6.5
6.3
6.1
5.9
5.7
5.5
5.3
5.1
4.9
4.7
4.5
3
BUSINESS CYCLES
Time Series Components
1.
2.
3.
4.
Trend (long‐run)
Cycle (short‐run)
Seasonality (short‐run, ex: monthly, quarterly)
Irregularities or random behavior
4
BUSINESS CYCLES
GDP and Trend (in logs)
6.5
6.3
6.1
5.9
5.7
5.5
5.3
5.1
4.9
4.7
4.5
5
BUSINESS CYCLES
Definition – Period between two peaks of the output gap. Short‐run fluctuations in economic activity, i.e., deviations from the long‐run trend. GDP Business Cycle (in logs)
0.08
1973
0.06
1990
0.04
1980
2000
2007
0.02
0
2003
‐0.02
1995
‐0.04
‐0.06
‐0.08
2009
1969
1976
1986
6
BUSINESS CYCLES
Phases of the Business Cycles
A cycle has two phases: One corresponds to the expansion which takes place simultaneously in many business activities, the following ...
Is a recession also covering many economic activities.
A technical definition of recession (NBER) ‐ two consecutive quarters of negative growth.
The expansion can be divided between recovery and prosperity. The recession may be divided between contraction (or crisis) and depression (term used only for very serious recessions). The cycle is reflected in the emergence of positive output gaps followed by negative output gaps. Positive gaps occur when the output is above the level of its trajectory trend.
Although recurrent, economic cycles come and go with varying amplitudes and duration. The duration of the cycles have varied over a year up to 10‐12 years.
7
BUSINESS CYCLES
Phases of the Business Cycle – The Role of