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The business cycle and industry comovement

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Author Info
Andreas Hornstein

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Abstract

The U.S. business cycle is characterized by the general increase and decrease of activity across all industries. When the pattern of industry comovement (documented here) is compared to corresponding properties of multi-sector growth models, a striking mismatch appears. Simply put, the basic multi-sector model has trouble accounting for the pattern of comovement. This problem holds whether one attributes the source of the business cycle to independent industry shocks or to mutually shared aggregate shocks.

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Article provided by Federal Reserve Bank of Richmond in its journal Economic Quarterly.

Volume (Year): (2000)
Issue (Month): Win ()
Pages: 27-48
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Handle: RePEc:fip:fedreq:y:2000:i:win:p:27-48

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Keywords: Business cycles

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lawrence J. Cristiano & Terry J. Fitzgerald, 1998. "The business cycle: it's still a puzzle," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 56-83. [Downloadable!]
  2. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-87, December. [Downloadable!] (restricted)
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  3. Hornstein, Andreas & Praschnik, Jack, 1997. "Intermediate inputs and sectoral comovement in the business cycle," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 573-595, December. [Downloadable!] (restricted)
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  4. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February. [Downloadable!] (restricted)
  5. Andreas Hornstein, 1998. "Inventory investment and the business cycle," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 49-71. [Downloadable!]
  6. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1989. "Building Blocks of Market Clearing Business Cycle Models," NBER Working Papers 3004, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Sato, Kazuo, 1976. "The Meaning and Measurement of the Real Value Added Index," The Review of Economics and Statistics, MIT Press, vol. 58(4), pages 434-42, November. [Downloadable!] (restricted)
  8. Michele Boldrin & Lawrence J. Christiano & Jonas D. M. Fisher, 2000. "Habit persistence, asset returns and the business cycle," Staff Report 280, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  9. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bernd Süssmuth & Ulrich Woitek, 2005. "Some New Results on Industrial Sector Mode-Locking and Business Cycle Formation," Studies in Nonlinear Dynamics & Econometrics, Berkeley Electronic Press, vol. 9(3), pages 1185-1185. [Downloadable!] (restricted)
  2. Ángel Estrada & David López-Salido, 2005. "Sectoral mark-up dynamics in Spain," Banco de España Working Papers 0503, Banco de España. [Downloadable!]
  3. Michael J. Lamla & Sarah M. Lein & Jan-Egbert Sturm, 2007. "News and Sectoral Comovement," Working papers 07-183, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
  4. F. Owen Irvine & Scott Schuh, 2005. "The roles of comovement and inventory investment in the reduction of output volatility," Working Papers 05-9, Federal Reserve Bank of Boston. [Downloadable!]
  5. Rebelo, Sérgio, 2005. "Real Business Cycle Models: Past, Present and Future," CEPR Discussion Papers 5384, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Junhee Lee, 2004. "sticky prices and comovement of business cycle," Econometric Society 2004 Far Eastern Meetings 582, Econometric Society. [Downloadable!]
  7. Owen Irvine & Scott Schuh, 2007. "The roles of comovement and inventory investment in the reduction of output volatility," Proceedings, Federal Reserve Bank of San Francisco, issue Nov. [Downloadable!]
  8. Francesco Busato, 2004. "Relative Demand Shocks," Economics Working Papers 2004-11, School of Economics and Management, University of Aarhus. [Downloadable!]
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