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What differentiates industrial business cycles? A cross-country investigation

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  • Magda Kandil

Abstract

Theoretical explanations appear in sharp contrast concerning the determinants of demand-driven industrial business cycles. Aggregate factors are likely to differentiate cyclical fluctuations for a given industry across countries. Industry-specific factors are likely to differentiate cyclical fluctuations across industries of a given economy. The differences are evaluated using data for industries producing private domestic output across a group of major industrial countries. Aggregate factors dominate industryspecific factors in explaining industrial cyclical fluctuations in response to aggregate demand shifts. Consistent with the various explanations, higher variability of aggregate demand moderates the response of industrial output to aggregate demand shifts across countries. Contrary to the implications of the new classical imperfect information model, cyclical fluctuations in industrial output appear also smaller in response to higher trend price inflation across countries. Business cycles appear, therefore, to be highly correlated across industries within countries.

Suggested Citation

  • Magda Kandil, 1997. "What differentiates industrial business cycles? A cross-country investigation," Applied Economics, Taylor & Francis Journals, vol. 29(2), pages 197-212.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:2:p:197-212
    DOI: 10.1080/000368497327263
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    2. Berends, P. A. J. & Romme, A. G. L., 2001. "Cyclicality of capital-intensive industries: a system dynamics simulation study of the paper industry," Omega, Elsevier, vol. 29(6), pages 543-552, December.

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