Advanced Search
MyIDEAS: Login to save this article or follow this journal

Beyond shocks: what causes business cycles? an overview


Author Info

  • Jeffrey C. Fuhrer
  • Scott Schuh


What makes economies rise and fall? What caused the Asian crisis, the recessions of the 1970's and 1980's, and even the Great Depression? According to many modern economists, shocks did. This unsatisfying answer lies at the heart of a currently popular framework for analyzing business cycle fluctuations. This framework assumes that the macroeconomy usually obeys simple behavioral relationships but is occasionally disrupted by large "shocks", which force it temporarily away from these relationships and into recession. The behavioral relationships then guide the orderly recovery of the economy back to full employment, where the economy remains until another significant shock upsets it.> Attributing fluctuations to shocks - movements in important economic variables that occur for reasons we do not understand - means we can never fully understand why they occur. As a result, it will always be difficult to predict recessions and to know what government policies would best avert or ameliorate them. Thus, the forty-second economic conference of the Federal Reserve Bank of Boston had as one of its key goals the identification of economic causes of business cycles. The greater the proportion of fluctuations we can classify as the observable and explainable product of purposeful economic decisions, the better chance we have of understanding, predicting, and avoiding recessions. Most participants at the conference concluded that the business cycle is not dead but is likely here to stay. Consequently, most also agreed that policymakers must learn to recognize and address the economy's vulnerability to disruptions and support research into the contribution of actions of economic agents to economic fluctuations. This article reviews the presentations at the conference and the themes that developed from the discussions.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

File URL:
Download Restriction: no

Bibliographic Info

Article provided by Federal Reserve Bank of Boston in its journal New England Economic Review.

Volume (Year): (1998)
Issue (Month): Nov ()
Pages: 3-24

as in new window
Handle: RePEc:fip:fedbne:y:1998:i:nov:p:3-24

Contact details of provider:
Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210
Phone: 617-973-3397
Fax: 617-973-4221
Web page:
More information through EDIRC

Order Information:

Related research

Keywords: Business cycles ; Monetary policy;

Other versions of this item:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Victor Zarnowitz & Ataman Ozyildirim, 2001. "Time Series Decomposition and Measurement of Business Cycles, Trends and Growth Cycles," Economics Program Working Papers, The Conference Board, Economics Program 01-03, The Conference Board, Economics Program.
  2. Kevin L. Kliesen, 2003. "The 2001 recession: how was it different and what developments may have caused it?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 23-38.
  3. Lean, Hooi Hooi & Teng, Kee Tuan, 2013. "Integration of world leaders and emerging powers into the Malaysian stock market: A DCC-MGARCH approach," Economic Modelling, Elsevier, Elsevier, vol. 32(C), pages 333-342.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:1998:i:nov:p:3-24. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.