Business CyclesUS BCFactsAD-AS previewClass 13: Business Cycles IntroJulieta CaunedoCORNELL UNIVERSITYABC Chapter 8 and Williamson Chapter chapter 3 (some)
Business CyclesUS BCFactsAD-AS previewThis ChapterWhat is a Business Cycle?The American Business Cycle: The Historical RecordBusiness Cycle FactsBusiness Cycle Analysis: A Preview
Long Run Growth vs. Short-Run Fluctuations19401950196019701980199020002010-20020406080100120Log Levelsreal gdp
Short-Run Fluctuations: Output195019601970198019902000-20-15-10-5051015Percentage Deviation from Hp-filtered trendreal gdp
Business CyclesUS BCFactsAD-AS previewWhat is a Business Cycle?Burns and Mitchell (Measuring Business Cycles, 1946) makes fivemain points about business cycles:1.Business cyclesare fluctuations of aggregate economicactivity, not a specific variable2.There areexpansions/boomsandcontractions/recessions3.Economic variables showcomovement; they have regular andpredictable patterns of behavior over the course of thebusiness cycle4.The business cycle is recurrent, butnot periodic5.The business cycle ispersistent: business cycles vary induration from more than one year to twelve years
Business CyclesUS BCFactsAD-AS previewBusiness Cycle ChronologyU.S. research on cycles began in 1920 at the National Bureau ofEconomic Research (NBER)NBER maintains thebusiness cycle chronology: a detailedhistory of business cyclesNBER sponsors business cycle studiesThe NBER does not define arecessionin terms of twoconsecutive quarters of decline in real GDP. Rather, arecession is a significant decline in economic activity spreadacross the economy, lasting more than a few months, normallyvisible in real GDP, real income, employment, industrialproduction, and wholesale-retail sales.
Business CyclesUS BCFactsAD-AS previewExpansions and contractionsAtroughis the lowpoint of the recessionApeakis the highpoint of the expansionPeaks and troughs areturning pointsand are officially