Inventories and the three phases of the business cycle
AbstractThis article demonstrates that recessions typically are followed by high-growth recovery phases that push output back to its prerecession level. Thus, postwar fluctuations in real output in the United States have consisted of three sequential phases rather than two-contractions, high-growth recoveries, and moderate-growth periods following recoveries. Data from before World War II also exhibit this pattern. For the postwar period, the three-phase pattern is shown to reflect swings in inventory investment and suggests that output fluctuations have an important transitory component. The evidence in this article supports B. DeLong and L. Summers's (1988) output-gaps view and M. Friedman's (1993) 'plucking' model view of fluctuations.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Working Paper Series / Economic Activity Section with number 128.
Date of creation: 1992
Date of revision:
Other versions of this item:
- Sichel, Daniel E, 1994. "Inventories and the Three Phases of the Business Cycle," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 269-77, July.
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