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Are these classical business cycles?

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  • Michael Reiter
  • Ulrich Woitek

Abstract

The aim of this paper is to test formally the classical business cycle hypothesis, using data from industrialized countries for the time period since 1960. The hypothesis is characterized by the view that the cyclical structure in GDP is concentrated in the investment series: fixed investment has typically a long cycle, while the cycle in inventory investment is shorter. To check the robustness of our results, we subject the data for 15 OECD countries to a variety of detrending techniques. While the hypothesis is not confirmed uniformly for all countries, there is a considerably high number for which the data display the predicted pattern. None of the countries shows a pattern which can be interpreted as a clear rejection of the classical hypothesis.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 398.

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Date of creation: Mar 1999
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Handle: RePEc:upf:upfgen:398

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Web page: http://www.econ.upf.edu/

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Keywords: business cycles; investment cycles; spectral tests;

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  1. Francis X. Diebold & Lee E. Ohanian & Jeremy Berkowitz, 1997. "Dynamic equilibrium economies: a framework for comparing models and data," Finance and Economics Discussion Series 1997-23, Board of Governors of the Federal Reserve System (U.S.).
  2. Mark W. Watson, 1991. "Measures of fit for calibrated models," Working Paper Series, Macroeconomic Issues 91-9, Federal Reserve Bank of Chicago.
  3. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
  4. Burnside, Craig, 1998. "Detrending and business cycle facts: A comment," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 513-532, May.
  5. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
  6. Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 533-540, May.
  7. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.
  8. Lawrence J. Christiano & Robert J. Vigfusson, 1999. "Maximum likelihood in the frequency domain: a time to build example," Working Paper 9901, Federal Reserve Bank of Cleveland.
  9. Wen, Yi, 1998. "Investment cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1139-1165, May.
  10. Ulrich Woitek, 1998. "A Note on the Baxter-King Filter," Working Papers 9813, Business School - Economics, University of Glasgow.
  11. Canova, Fabio, 1996. "Three tests for the existence of cycles in time series," Ricerche Economiche, Elsevier, vol. 50(2), pages 135-162, June.
  12. Gale, Douglas, 1996. "Delay and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 169-98, April.
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Cited by:
  1. Robert Hart & James Malley & Ulrich Woitek, 2009. "Real earnings and business cycles: new evidence," Empirical Economics, Springer, vol. 37(1), pages 51-71, September.
  2. Ulrich Woitek, 1998. "A Note on the Baxter-King Filter," Working Papers 9813, Business School - Economics, University of Glasgow.
  3. A'Hearn, Brian & Woitek, Ulrich, 2001. "More international evidence on the historical properties of business cycles," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 321-346, April.

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