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Medium-Term Business Cycles

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Author Info
Diego Comin
Mark Gertler

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Abstract

Over the postwar period, many industrialized countries have experienced significant medium-frequency oscillations between periods of robust growth versus relative stagnation. Conventional business cycle filters, however, tend to sweep these oscillations into the trend. In this paper we explore whether they may, instead, reflect a persistent response of economic activity to the high-frequency fluctuations normally associated with the cycle. We define as the medium-term cycle the sum of the highand medium-frequency variation in the data, and then show that these kinds of fluctuations are substantially more volatile and persistent than are the conventional measures. These fluctuations, further, feature significant procyclical movements in both embodied and disembodied technological change, and research and development (R&D), as well as the efficiency and intensity of resource utilization. We then develop a model of medium-term business cycles. A virtue of the framework is that, in addition to offering a unified approach to explaining the high- and mediumfrequency variation in the data, it fully endogenizes the movements in productivity that appear central to the persistence of these fluctuations. For comparison, we also explore how well an exogenous productivity model can explain the facts. (JEL E3, O3)

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File URL: http://hdl.handle.net/10.1257/aer.96.3.523
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 3 (June)
Pages: 523-551
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Handle: RePEc:aea:aecrev:v:96:y:2006:i:3:p:523-551

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  8. Julio J. Rotemberg, 2003. "Stochastic Technical Progress, Smooth Trends, and Nearly Distinct Business Cycles," American Economic Review, American Economic Association, vol. 93(5), pages 1543-1559, December. [Downloadable!]
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  12. Diego Comin, 2004. "R&D: A Small Contribution to Productivity Growth," NBER Working Papers 10625, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Philippe Aghion & Gilles Saint-Paul, 1998. "Uncovering Some Causal Relationships Between Productivity Growth and the Structure of Economic Fluctuations: A Tentative Survey," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 12(2), pages 279-303, 07. [Downloadable!] (restricted)
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  21. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
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  26. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June. [Downloadable!] (restricted)
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  32. Russell Cooper & John Haltiwanger, 1995. "Les complémentarités en macroéconomie: éléments théoriques et empirique," Annales d'Economie et de Statistique, ADRES, issue 37-38, pages 11, Janvier-J. [Downloadable!]
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  40. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
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  41. Basu, Susanto, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 719-51, August. [Downloadable!] (restricted)
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