Nber’s Business Cycle Dating

Topics: Unemployment, Business cycle, Great Depression Pages: 4 (1390 words) Published: May 6, 2013
The NBER’s Business Cycle Dating Committee uses many methods and data analysis to determine the timing of business cycle peaks and troughs. They do not simply use, as the media frequently states, 2 consecutive quarters of decline in RGDP. In fact, the committee does not even have a set of rules or definitions they must follow to determine the timing of the business cycles peaks and troughs. The committee “examines and compares the behavior of various measures of broad activity: real GDP measured on the product and income sides, economy-wide employment, and real income.” The committee also has other indicators they look at such as the Federal Reserve’s index of industrial production (IP). When looking at other indicators, it opens the potential to double count some of the sectors that are included in real GDP. This is due to the complexity of the economy, i.e., when “economy-wide indicators are in conflict or do not have well-defined peaks or troughs”, this helps them to determine the peak and trough dates. To further explain the NBER’s Business Cycle Dating methodologies I will use their memos from the recent U.S. 2007 – 2009 Great Recession to highlight their analysis and determinations. To identify the start of the great recession they needed to identify a peak. The NBER “emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.” and “believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis.” They looked at both of these figures along with “real personal income less transfer payments, real manufacturing and wholesale-retail trade sales, industrial production, and employment estimates based on the household survey.” From...
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