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.
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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)
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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
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