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Interaction between Business Cycles and Economic Growth

Author

Listed:
  • Sohei Kaihatsu

    (Bank of Japan)

  • Maiko Koga

    (Bank of Japan)

  • Tomoya Sakata

    (Bank of Japan)

  • Naoko Hara

    (Bank of Japan)

Abstract

In the aftermath of the recent global financial crisis, advanced economies have faced sluggish recoveries or long-lasting economic slowdowns. This experience has challenged the conventional dichotomy of business cycles and economic growth, which has long been central to macroeconomic analysis. Against this backdrop, we review the literature looking at the relationship between business cycles and economic growth. This study consists of three parts. First, we provide basic ideas about the relationship of business cycles and economic growth, and a simple empirical analysis on economic growth rates in advanced economies. Second, we survey studies which look at the effects of business cycles on economic growth. Specifically, we focus on hysteresis effects caused by labor market structure, firm activity and fiscal policy. Third, we review the literature looking at the effects of economic growth on business cycles, through mechanisms such as technological progress and population ageing.

Suggested Citation

  • Sohei Kaihatsu & Maiko Koga & Tomoya Sakata & Naoko Hara, 2018. "Interaction between Business Cycles and Economic Growth," Bank of Japan Working Paper Series 18-E-12, Bank of Japan.
  • Handle: RePEc:boj:bojwps:wp18e12
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    References listed on IDEAS

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    More about this item

    Keywords

    Business cycles; economic growth; hysteresis;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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