Lec_6_Rules_of_Thumb

Lec_6_Rules_of_Thumb - EC 400 1 Rules of Thumb for...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: EC 400 1 Rules of Thumb for Identifying a Recession How do I pick a set of indicators to examine? Variables in rules of thumb Variables that theory implies will lead recessions (or lead business cycle peaks) What is a recession? Not just a decline in output. If GDP declines permanently, it is not a recession. GDP must decline and then recover in order for there to have been a recession. 4 criteria for there to have been a recession: 1. amplitude (depth and rebound) 2. duration 3 displacemen 3. displacement 4. diffusion Rules of thumb combine duration with one of the other three EC 400 2 Rule of Thumb 1 Amplitude (and duration) Real GDP must decline at least two quarters. Industrial Production must decline for at Industrial Production must decline for at least 6 months. Rule of Thumb 2 Displacement Total employment declines by 1.5% The unemployment rate increase by 200 The unemployment rate increase by 200 basis points ....
View Full Document

Page1 / 5

Lec_6_Rules_of_Thumb - EC 400 1 Rules of Thumb for...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online