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High-growth Recoveries, Inventories and the Great Moderation

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  • Maximo Camacho

    ()
    (Universidad de Murcia)

  • Gabriel Perez-Quiros

    ()
    (Banco de España)

  • Hugo Rodríguez Mendizábal

    ()
    (Instituto de Análisis Económico (CSIC))

Abstract

We present evidence about the loss of the so-called "plucking effect", that is, a high-growth phase of the cycle typically observed at the end of recessions. This result matches the belief, presented informally by different authors, that recession may have now permanent effects, or recession have now an L shape versus old-time recessions that always had a V shape. We also show that the loss of the "plucking effect" can explain part of the Great Moderation. We postulate that these two phenomena may be due to changes in inventory management brought about by improvements in information and communications technologies.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/09/Fic/dt0917e.pdf
File Function: First version, August 2009
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0917.

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Length: 44 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:bde:wpaper:0917

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Keywords: Business cycle features; Great Moderation; High-growth recovery;

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References

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  1. Shaghil Ahmed & Andrew Levin & Beth Anne Wilson, 2002. "Recent U.S. macroeconomic stability: good policies, good practices or good luck?," International Finance Discussion Papers 730, Board of Governors of the Federal Reserve System (U.S.).
  2. Steven J. Davis & James A. Kahn, 2008. "Interpreting the Great Moderation: Changes in the Volatility of Economic Activity at the Macro and Micro Levels," NBER Working Papers 14048, National Bureau of Economic Research, Inc.
  3. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-79, September.
  4. Camacho, Maximo & Perez-Quiros, Gabriel & Saiz, Lorena, 2008. "Do European business cycles look like one?," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2165-2190, July.
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  7. Kim, Chang-Jin & Nelson, Charles R, 1999. "Friedman's Plucking Model of Business Fluctuations: Tests and Estimates of Permanent and Transitory Components," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 317-34, August.
  8. Camacho Maximo & Perez Quiros Gabriel, 2007. "Jump-and-Rest Effect of U.S. Business Cycles," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(4), pages 1-39, December.
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  16. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
  17. Erica L. Groshen & Simon Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Aug).
  18. Stacey L. Schreft & Aarti Singh & Ashley Hodgson, 2005. "Jobless recoveries and the wait-and-see hypothesis," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 81-99.
  19. James A. Kahn & Margaret M. McConnell & Gabriel Perez-Quiros, 2002. "On the causes of the increased stability of the U.S. economy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 183-202.
  20. Herrera, Ana Maria & Pesavento, Elena, 2005. "The Decline in U.S. Output Volatility: Structural Changes and Inventory Investment," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 462-472, October.
  21. Todd E. Clark, 2009. "Is the Great Moderation over? an empirical analysis," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 5-42.
  22. Boldin Michael D., 1996. "A Check on the Robustness of Hamilton's Markov Switching Model Approach to the Economic Analysis of the Business Cycle," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(1), pages 1-14, April.
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Cited by:
  1. Bec, Frédérique & Bessec, Marie, 2013. "Inventory Investment Dynamics and Recoveries: A Comparison of Manufacturing and Retail Trade Sectors," Economics Papers from University Paris Dauphine 123456789/11777, Paris Dauphine University.

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