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The Classification of Economic Activity into Expansions and Recessions

Author

Listed:
  • Oscar Jorda
  • Travis Berge

    (Department of Economics, University of California Davis)

Abstract

The Business Cycle Dating Committee (BCDC) of the National Bureau of Economic Research provides a historical chronology of business cycle turning points. This paper investigates three central aspects about this chronology: (1) How skillful is the BCDC in classifying economic activity into expansions and recessions? (2) Which indices of business conditions best capture the current but unobservable state of the business cycle? And (3) Which indicators predict future turning points best and at what horizons? We answer each of these questions in detail with methods novel to economics designed to assess classification ability. In the process we clarify several important features of business cycle phenomena.

Suggested Citation

  • Oscar Jorda & Travis Berge, 2009. "The Classification of Economic Activity into Expansions and Recessions," Working Papers 308, University of California, Davis, Department of Economics.
    • Handle: RePEc:cda:wpaper:308
    as

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    File URL: https://repec.dss.ucdavis.edu/files/nJrhx3LHH4z2T3EuCU2QMKk1/09-18.pdf
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    References listed on IDEAS

    as
    1. Marcelle Chauvet & James D. Hamilton, 2006. "Dating Business Cycle Turning Points," Contributions to Economic Analysis, in: Nonlinear Time Series Analysis of Business Cycles, pages 1-54, Emerald Group Publishing Limited.
    2. 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.
    3. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    4. Rudebusch, Glenn D. & Williams, John C., 2009. "Forecasting Recessions: The Puzzle of the Enduring Power of the Yield Curve," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 492-503.
    5. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, March.
    Full references (including those not matched with items on IDEAS)

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