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Evaluating non-structural measures of the business cycle

  • Timothy Cogley

This paper evaluates a number of non-structural measures of the business cycle. It adopts a structural definition of the cycle, interprets non-structural measures as noisy approximations, and seeks a proxy that is reliable across a variety of plausible trend-cycle structures. The results favor a consumption-based measure proposed by Cochrane (1994). Across a variety of structures, it has the highest correlation and coherence with structural cycles, and best matches their dynamic properties. When applied to U.S. data, consumption-based measures conform closely to the dates of NBER recessions. They also yield a strong negative correlation between the cyclical components of productivity and hours, a fact that deepens the challenge to models which emphasize technology shocks as the primary source of business cycles.

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File URL: http://www.frbsf.org/econrsrch/econrev/97-3/3-21.pdf
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Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (1997)
Issue (Month): ()
Pages: 3-21

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Handle: RePEc:fip:fedfer:y:1997:p:3-21:n:3
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  2. Romer, Christina D., 1994. "Remeasuring Business Cycles," The Journal of Economic History, Cambridge University Press, vol. 54(03), pages 573-609, September.
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  4. King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231.
  5. Robert J. Gordon, 1979. "The "End-of-Expansion" Phenomenon in Short-Run Productivity Behavior," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 447-462.
  6. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  7. Evans, George W. & Reichlin, Lucrezia, 1993. "Information, Forecasts and Measurement of the Business Cycle," CEPR Discussion Papers 756, C.E.P.R. Discussion Papers.
  8. 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.
  9. Faust, Jon & Leeper, Eric M, 1997. "When Do Long-Run Identifying Restrictions Give Reliable Results?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 345-53, July.
  10. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
  11. Christiano, Lawrence J, 1992. "Searching for a Break in GNP," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 237-50, July.
  12. Orazio P. Attanasio & Guglielmo Weber, 1994. "Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey," NBER Working Papers 4795, National Bureau of Economic Research, Inc.
  13. John H. Cochrane, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 241-265.
  14. Nelson, Charles R & Kang, Heejoon, 1979. "Spurious Periodicity in Inappropriately Detrended Time Series," The Warwick Economics Research Paper Series (TWERPS) 161, University of Warwick, Department of Economics.
  15. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
  16. Diebold, Francis X & Rudebusch, Glenn D, 1990. "A Nonparametric Investigation of Duration Dependence in the American Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 596-616, June.
  17. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April.
  18. Cogley, T., 1989. "International Evidence On The Size Of The Random Walk In Output," Discussion Papers in Economics at the University of Washington 89-02, Department of Economics at the University of Washington.
  19. Shea, John, 1995. "Union Contracts and the Life-Cycle/Permanent-Income Hypothesis," American Economic Review, American Economic Association, vol. 85(1), pages 186-200, March.
  20. Marco Lippi & Lucrezia Reichlin, 1994. "Diffusion of technical change and the decomposition of output into trend and cycle," ULB Institutional Repository 2013/10157, ULB -- Universite Libre de Bruxelles.
  21. Meghir, Costas & Weber, Guglielmo, 1996. "Intertemporal Nonseparability or Borrowing Restrictions? A Disaggregate Analysis Using a U.S. Consumption Panel," Econometrica, Econometric Society, vol. 64(5), pages 1151-81, September.
  22. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  23. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1.
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