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Stylized Facts of the Business Cycle: Universal Phenomenon, or Institutionally Determined?

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  • Vadim Kufenko

    () (University of Hohenheim)

  • Niels Geiger

    () (University of Hohenheim)

Abstract

Abstract This paper empirically investigates and theoretically reflects on the generality of some “stylized facts” of business cycles. Using data for 1960–2016 and a sample of OECD countries, the duration of business cycles as well as three models capturing core macroeconomic relations are estimated: the Phillips curve (the inflation-unemployment nexus), Okun’s law (i.e. the relation between output growth and unemployment) and the inflation-output relation. Results are validated by relevant statistical tests. Observed durations vary from 4.2 to 7.4 years, and estimated coefficients differ in signs and magnitudes. An explanation of this heterogeneity is attempted by referring to proxies for various institutional variables. The findings suggest that core coefficients in the relations, such as the slope of the Phillips curve, show significant correlation with some of these variables, but no uniform results are obtained. In the detailed theoretical discussion and interpretation it is thus argued that the notable differences between countries call the universality of the “stylized facts” into question, but also that these variations cannot be explained exhaustively by the institutional proxy variables employed here.

Suggested Citation

  • Vadim Kufenko & Niels Geiger, 2017. "Stylized Facts of the Business Cycle: Universal Phenomenon, or Institutionally Determined?," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 13(2), pages 165-187, November.
    • Handle: RePEc:spr:jbuscr:v:13:y:2017:i:2:d:10.1007_s41549-017-0018-5
    DOI: 10.1007/s41549-017-0018-5
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    Keywords

    Business cycles; Empirical analysis; Institutions; Stylized facts;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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