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Are There Classical Business Cycles?

  • Michael Reiter
  • Ulrich Woitek

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 hypoth- esis is characterized by the view that the cyclical structure in GDP is concentrated in the investment series: mixed investment has typically a long cycle, while the cycle in inventory investment is shorter. To check the robustness of our results, we sub- ject the data for 15 OECD countries to a variety of detrending techniques. While the hypothesis is not con rmed uniformly for all countries, there is a considerably high number for which the data display the predicted pattern. None of the coun- tries shows a pattern which can be interpreted as a clear rejection of the classical hypothesis.

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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 1999_05.

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Date of creation: Feb 1999
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Handle: RePEc:gla:glaewp:1999_05
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Web page: http://www.gla.ac.uk/schools/business/research/
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  1. Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 533-540, May.
  2. 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.
  3. Francis X. Diebold & Lee E. Ohanian & Jeremy Berkowitz, 1997. "Dynamic equilibrium economies: a framework for comparing models and data," Working Papers 97-7, Federal Reserve Bank of Philadelphia.
  4. Burnside, Craig, 1998. "Detrending and business cycle facts: A comment," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 513-532, May.
  5. Canova, Fabio, 1996. "Three tests for the existence of cycles in time series," Ricerche Economiche, Elsevier, vol. 50(2), pages 135-162, June.
  6. Ulrich Woitek, 1998. "A Note on the Baxter-King Filter," Working Papers 9813, Business School - Economics, University of Glasgow.
  7. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
  8. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.
  9. 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.
  10. Wen, Yi, 1998. "Investment cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1139-1165, May.
  11. Gale, Douglas, 1996. "Delay and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 169-98, April.
  12. Mark W. Watson, 1991. "Measures of fit for calibrated models," Working Paper Series, Macroeconomic Issues 91-9, Federal Reserve Bank of Chicago.
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