IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

No More Rocking Horses: Trading Business-Cycle Depth for Duration Using an Economy-Specific Characteristic

  • Ossama Mikhail

Regarding the trade-off between the depth and the duration of recessions, there exists a mounting empirical evidence of the idiosyncratic and non-synchronized behavior of the business cycle over time within and across countries. In this paper, I propose a stochastic dynamic general equilibrium formulation wherein an economy-specific characteristic - labeled as the missing parameter - (e.g., the financial institutional framework and regulations) does control the magnitude, severity and persistence of the business cycle. The results of the simulations show that as much as 0.5 of a percentage point of GDP in depth and a relative difference of 3 years duration can be attributed to this parameter. Overlooked for decades, this missing parameter hypothesizes that Frisch's 'rocking-horse theory' of the business cycle is an inaccurate description of the business-cycle behavior.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://128.118.178.162/eps/mac/papers/0402/0402026.pdf
Download Restriction: no

Paper provided by EconWPA in its series Macroeconomics with number 0402026.

as
in new window

Length: 18 pages
Date of creation: 23 Feb 2004
Date of revision:
Handle: RePEc:wpa:wuwpma:0402026
Note: Type of Document - pdf; prepared on Win98; pages: 18; figures: 1
Contact details of provider: Web page: http://128.118.178.162

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  2. M. Ayhan Kose & Eswar Prasad & Marco Terrones, 2003. "How Does Globalization Affect the Synchronization of Business Cycles?," IMF Working Papers 03/27, International Monetary Fund.
  3. Manuelli, Rodolfo & Sargent, Thomas J., 1988. "Models of business cycles : A review essay," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 523-542.
  4. Steve Ambler & Emanuela Cardia & Christian Zimmermann, 1999. "International Business Cycles: What are the Facts?," Cahiers de recherche CREFE / CREFE Working Papers 90, CREFE, Université du Québec à Montréal.
  5. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
  6. W. Kenn Farr & Richard A. Lord & J. Larry Wolfenbarger, 1998. "Economic Freedom, Political Freedom, and Economic Well-Being: A Causality Analysis," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 247-262, Fall.
  7. Brian M. Doyle & Jon Faust, 2005. "Breaks in the Variability and Comovement of G-7 Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 721-740, November.
  8. Victor Zarnowitz, 1985. "Recent Work on Business Cycles in Historical Perspective: Review of Theories and Evidence," NBER Working Papers 1503, National Bureau of Economic Research, Inc.
  9. James H. Stock & Mark W. Watson, 2003. "Understanding Changes in International Business Cycle Dynamics," NBER Working Papers 9859, National Bureau of Economic Research, Inc.
  10. van Dijk, D.J.C. & Osborn, D.R. & Sensier, M., 2002. "Changes in variability of the business cycle in the G7 countries," Econometric Institute Research Papers EI 2002-28, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  11. Daron Acemoglu & Simon Johnson & James Robinson & Yunyong Thaicharoen, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," NBER Working Papers 9124, National Bureau of Economic Research, Inc.
  12. Djankov, Simeon & Glaeser, Edward L & López-de-Silanes, Florencio & Shleifer, Andrei, 2003. "The New Comparative Economics," CEPR Discussion Papers 3882, C.E.P.R. Discussion Papers.
  13. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc.
  14. V. V. Chari & Patrick Kehoe & Ellen McGrattan, 2004. "Business Cycle Accounting," Levine's Bibliography 122247000000000560, UCLA Department of Economics.
  15. Donald Morgan & Bertrand Rime & Philip Strahan, 2003. "Bank Integration and State Business Cycles," NBER Working Papers 9704, National Bureau of Economic Research, Inc.
  16. Sebastian Edwards & Javier Gomez Biscarri & Fernando Perez de Gracia, 2003. "Stock Market Cycles, Financial Liberalization and Volatility," NBER Working Papers 9817, National Bureau of Economic Research, Inc.
  17. repec:rus:hseeco:72137 is not listed on IDEAS
  18. Artis, Michael J & Zhang, Wenda, 1999. "Further Evidence on the International Business Cycle and the ERM: Is There a European Business Cycle?," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 120-32, January.
  19. Thomas Dalsgaard & Jørgen Elmeskov & Cyn-Young Park, 2002. "Ongoing changes in the business cycle - evidence and causes," SUERF Studies, SUERF - The European Money and Finance Forum, number 20 edited by Morten Balling, November.
  20. Jonathan Heathcote & Fabrizio Perri, 2001. "Financial Globalization and Real Regionalization," Working Papers 01-11, New York University, Leonard N. Stern School of Business, Department of Economics.
  21. Thomas Helbling & Tamim Bayoumi, 2003. "Are they All in the Same Boat? the 2000-2001 Growth Slowdown and the G-7 Business Cycle Linkages," IMF Working Papers 03/46, International Monetary Fund.
  22. repec:dgr:uvatin:20030031 is not listed on IDEAS
  23. John Simon, 2001. "The Decline in Australian Output Volatility," RBA Research Discussion Papers rdp2001-01, Reserve Bank of Australia.
  24. Artis, Michael J & Zhang, W, 1997. "International Business Cycles and the ERM: Is There a European Business Cycle?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(1), pages 1-16, January.
  25. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  26. repec:rus:hseeco:123092 is not listed on IDEAS
  27. Ramsey, J.B. & Rothman, P., 1993. "Time Irreversibility and Business Cycle Asymmetry," Working Papers 93-39, C.V. Starr Center for Applied Economics, New York University.
  28. repec:dgr:uvatin:2003031 is not listed on IDEAS
  29. Brian M. Doyle & Jon Faust, 2002. "An investigation of co-movements among the growth rates of the G-7 countries," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 427-437.
  30. Quah, Danny T, 1995. "Business Cycle Empirics: Calibration and Estimation: An Introduction," Economic Journal, Royal Economic Society, vol. 105(433), pages 1594-96, November.
  31. Todd E. Clark & Kwanho Shin, 1998. "The sources of fluctuations within and across countries," Research Working Paper 98-04, Federal Reserve Bank of Kansas City.
  32. Terence C. Mills & Ping Wang, 2002. "Plucking models of business cycle fluctuations: Evidence from the G-7 countries," Empirical Economics, Springer, vol. 27(2), pages 255-276.
  33. Sheffrin, Steven M., 1988. "Have economic fluctuations been dampened? : A look at evidence outside the United States," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 73-83, January.
  34. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  35. Artis, Michael J & Kontolemis, Zenon G & Osborn, Denise R, 1997. "Business Cycles for G7 and European Countries," The Journal of Business, University of Chicago Press, vol. 70(2), pages 249-79, April.
  36. repec:cto:journl:v:18:y:1998:i:2:p: is not listed on IDEAS
  37. Hoover, Kevin D, 1995. "Facts and Artifacts: Calibration and the Empirical Assessment of Real-Business-Cycle Models," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 24-44, January.
  38. Zarnowitz, Victor, 1985. "Recent Work on Business Cycles in Historical Perspective: A Review of Theories and Evidence," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 523-80, June.
  39. Edwards, Sebastian, 2003. "Review of Joseph E. Stiglitz's Globalization and its Discontents: (W.W. Norton, New York and London)," Journal of Development Economics, Elsevier, vol. 70(1), pages 252-257, February.
  40. Helg, Rodolfo & Manasse, Paolo & Monacelli, Tommaso & Rovelli, Riccardo, 1995. "How much (a)symmetry in Europe? Evidence from industrial sectors," European Economic Review, Elsevier, vol. 39(5), pages 1017-1041, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0402026. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.