Measuring business cycles by saving for a rainy day
AbstractWe propose a simple saving-based measure of the cyclical component in GDP. The measure is motivated by the prediction that the representative consumer changes savings in response to temporary deviations of income from its stochastic trend, while satisfying a present-value budget constraint. To evaluate our procedure, we employ the bivariate error correction model of Cochrane (1994) to the member countries of the G-7 and Australia. Our estimates reveal, that to a close approximation, the stochastic trend component of GDP is consumption and the transitory component is the error correction term, which justifies the use of our saving-based measure.
Download InfoIf 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.
Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 50.
Date of creation: 2010
Date of revision:
Other versions of this item:
- Mario J. Crucini & Mototsugu Shintani, 2010. "Measuring Business Cycles by Saving for a Rainy Day," NBER Working Papers 16075, National Bureau of Economic Research, Inc.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-24 (All new papers)
- NEP-BEC-2010-07-24 (Business Economics)
- NEP-CBA-2010-07-24 (Central Banking)
- NEP-DGE-2010-07-24 (Dynamic General Equilibrium)
- NEP-MAC-2010-07-24 (Macroeconomics)
- NEP-OPM-2010-07-24 (Open Economy Macroeconomic)
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.:
- James C. Morley & Charles R. Nelson & Eric Zivot, 2003.
"Why Are the Beveridge-Nelson and Unobserved-Components Decompositions of GDP So Different?,"
The Review of Economics and Statistics,
MIT Press, vol. 85(2), pages 235-243, May.
- Tom Doan, . "RATS programs to replicate Morley-Nelson-Zivot state space decomposition," Statistical Software Components RTZ00115, Boston College Department of Economics.
- James Morley & Charles Nelson & Eric Zivot, 2003.
"Why are Beveridge-Nelson and Unobserved-component decompositions of GDP so Different?,"
UWEC-2002-18-P, University of Washington, Department of Economics.
- James Morley & Charles Nelson & Eric Zivot, 2002. "Why Are Beveridge-Nelson and Unobserved-Component Decompositions of GDP So Different?," Working Papers UWEC-2002-01, University of Washington, Department of Economics.
- Charles Nelson & Eric Zivot, 2000. "Why are Beveridge-Nelson and Unobserved-Component Decompositions of GDP so Different?," Econometric Society World Congress 2000 Contributed Papers 0692, Econometric Society.
- James C. Morley & Charles Nelson & Eric Zivot, 2000. "Why Are Beveridge-Nelson and Unobserved-Component Decompositions of GDP So Different?," Discussion Papers in Economics at the University of Washington 0013, Department of Economics at the University of Washington.
- James C. Morley & Charles Nelson & Eric Zivot, 2000. "Why Are Beveridge-Nelson and Unobserved-Component Decompositions of GDP So Different?," Working Papers 0013, University of Washington, Department of Economics.
- Ogaki, M. & Park, Y.Y., 1989.
"A Cointegration Approach To Estimating Preference Parameters,"
RCER Working Papers
209, University of Rochester - Center for Economic Research (RCER).
- Ogaki, Masao & Park, Joon Y., 1997. "A cointegration approach to estimating preference parameters," Journal of Econometrics, Elsevier, vol. 82(1), pages 107-134.
- Ravn, M.O., 1996.
"Permanent and transitory shocks, and the UK business cycle,"
Discussion Paper Series In Economics And Econometrics
9627, Economics Division, School of Social Sciences, University of Southampton.
- Ravn, Morten O, 1997. "Permanent and Transitory Shocks, and the UK Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(1), pages 27-48, Jan.-Feb..
- George Evans & Lucrezia Reichlin, 1994.
"Information, forecasts and measurement of the business cycle,"
ULB Institutional Repository
2013/10155, ULB -- Universite Libre de Bruxelles.
- Evans, George & Reichlin, Lucrezia, 1994. "Information, forecasts, and measurement of the business cycle," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 233-254, April.
- Evans, George W & Reichlin, Lucrezia, 1993. "Information, Forecasts and Measurement of the Business Cycle," CEPR Discussion Papers 756, C.E.P.R. Discussion Papers.
- Shintani Mototsugu, 1994.
"Cointegration and Tests of the Permanent Income Hypothesis: Japanese Evidence with International Comparisons,"
Journal of the Japanese and International Economies,
Elsevier, vol. 8(2), pages 144-172, June.
- Shintani, M., 1993. "Cointegration and Tests Of the Permanent Income Hypothesis: Japanese Evidence with International Comparisons," ISER Discussion Paper 0311, Institute of Social and Economic Research, Osaka University.
- Cogley, T. & Nason, J.M., 1992. "Effects of Hodrick-Prescott Filter on Trend and Difference Stationary Time Series : Implications for Business Cycle Research," UBC Departmental Archives 92-23, UBC Department of Economics.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Measuring business cycles by saving for a rainy day
by Christian Zimmermann in NEP-DGE blog on 2010-07-28 14:07:39
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez).
If references are entirely missing, you can add them using this form.