ASYMMETRY AND THE AMPLITUDE OF BUSINESS CYCLE FLUCTUATIONS: A QUANTITATIVE INVESTIGATION OF THE ROLE OF FINANCIAL FRICTIONS

2016 ◽  
Vol 22 (2) ◽  
pp. 279-306 ◽  
Author(s):  
Manoj Atolia ◽  
John Gibson ◽  
Milton Marquis
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Financial Frictions ◽  
Quantitative Investigation ◽  
Macroeconomic Volatility ◽  
Access To Credit ◽  
Business Cycle Fluctuations ◽  
Key Features ◽  
The Business Cycle

We examine the quantitative significance of financial frictions that reduce firms' access to credit in explaining asymmetric business cycles characterized by disproportionately severe downturns. Using rate spread data to calibrate the severity of these frictions, we successfully match several key features of U.S. data. Specifically, although output and consumption are relatively symmetric (with output being slightly more asymmetric), investment and hours worked display significant asymmetry over the business cycle. We also demonstrate that our financial frictions are capable of significantly amplifying adverse shocks during severe downturns. Although the data suggest that these frictions are only active occasionally, our results indicate that they are still a significant source of macroeconomic volatility over the business cycle.

scholarly journals News-Driven Business Cycles: Insights and Challenges

2014 ◽  
Vol 52 (4) ◽  
pp. 993-1074 ◽  
Author(s):  
Paul Beaudry ◽  
Franck Portier
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Empirical Evidence ◽  
Economic Fluctuations ◽  
Aggregate Fluctuations ◽  
Business Cycle Fluctuations ◽  
Widespread Belief ◽  
Way Of Thinking ◽  
The Many

There is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations. The news view of business cycles offers a formalization of this perspective. In this paper we discuss mechanisms by which changes in agents' information, due to the arrival of news, can cause business cycle fluctuations driven by expectational change, and we review the empirical evidence aimed at evaluating their relevance. In particular, we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations, while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established. (JEL D83, D84, E13, E32, O33)

scholarly journals WHATEVER HAPPENED TO THE BUSINESS CYCLE? A BAYESIAN ANALYSIS OF JOBLESS RECOVERIES

2010 ◽  
Vol 14 (5) ◽  
pp. 709-726 ◽  
Author(s):  
Kristie M. Engemann ◽  
Michael T. Owyang
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Inventory Management ◽  
Postwar Period ◽  
Macroeconomic Volatility ◽  
Jobless Recoveries ◽  
The Past ◽  
Economic Downturns ◽  
Manufacturing Sectors ◽  
The Business Cycle

During the typical recovery from U.S. postwar period economic downturns, employment recovers to its prerecession level within months of the output trough. However, during the past two recoveries, employment has taken up to three years to achieve its prerecession benchmark. We propose a formal empirical model of business cycles with recovery periods to demonstrate that the past two recoveries have been statistically different from previous experiences. We find that this difference can be attributed to a shift in the speed of transition between business cycle regimes. Moreover, we find this shift results from both durable and nondurable manufacturing sectors losing their cyclical characteristics. We argue that this finding of acyclicality in post-1980 manufacturing sectors is consistent with previous hypotheses (e.g., improved inventory management) regarding the reduction in macroeconomic volatility over the same period. These results suggest a link between the two phenomena, which have heretofore been studied separately.

Business-cycle fluctuations in economic activity

2021 ◽  
pp. 105-125
Author(s):  
Jesper Rangvid
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Empirical Evidence ◽  
Economic Activity ◽  
Second Phase ◽  
Growth Trend ◽  
Business Cycle Fluctuations ◽  
The Business Cycle ◽  
Two Phases

This chapter explains what the business cycle is and what causes business-cycle fluctuations. We call fluctuations in economic activity around the long-term growth trend ‘the business cycle’. The business cycle consists of two phases. The first is a period of strong economic activity. The second, following the first, is a period of weak economic activity. We call the first phase of the business cycle an ‘expansion’ and the second phase a ‘contraction’ or ‘recession’. The chapter explains what causes business cycles, and examines the empirical evidence on the lengths and strengths of the typical business cycle. It finds that expansions typically last longer than recessions. The chapter also shows that the length of expansions has increased during recent decades.

Synchronisation of Regional Business Cycles of Eastern Polish Provinces with the National Cycle in the Context of Regional Economic Structures

2015 ◽  
Vol 10 (2) ◽  
pp. 157-171
Author(s):  
Rafał Warżała
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Regional Variation ◽  
Regional Economic ◽  
Business Cycle Fluctuations ◽  
Cyclical Fluctuations ◽  
Band Pass ◽  
The Business Cycle ◽  
Regional Product ◽  
Regional Perspective

The objective of the article is to determine the degree of regional variation among provinces located in so-called Eastern Poland. The criterion for such variation is the structure of the generated GDP and the course of fluctuations in business cycles related to it. The analysis of economy structures in such provinces, as well as application of band-pass filters, used for separating the course of cyclical fluctuations, enabled the evaluation of the degree of structural discrepancies and business cycle discrepancies in five examined provinces. The analysis of cycle morphology in a regional perspective confirmed significant discrepancies in the course of the business cycle fluctuations in comparison to the cycle for Poland in general. The relation between the structure of the generated regional product and its co-convergence with the reference cycle is also visible. Regions characterised by a much higher or much lower share of agriculture in the GDP show different sensitivity to business cycle changes. Furthermore, these regions of Eastern Poland which have industries with a clearly pro-export nature (Warmia and Mazury, Podlasie and Podkarpackie) retain their separate character in the course of the fluctuations of the business cycle, differing from other regions included in the examined area of the country.

Development blocks, malinvestment and structural tensions – the Åkerman–Dahmén theory of the business cycle

2010 ◽  
Vol 7 (1) ◽  
pp. 105-129 ◽  
Author(s):  
LENNART ERIXON
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Institutional Theory ◽  
Financial Market ◽  
Turning Points ◽  
Optimization Models ◽  
Market Conditions ◽  
Modern Business ◽  
The Business Cycle

Abstract:Johan Åkerman and Erik Dahmén's institutional theory of economic fluctuations is a constructive alternative to traditional macroeconomic approaches and also to modern business-cycle analysis based on microeconomic optimization models. By its integration of a business-cycle and growth perspective, Åkerman and Dahmén's analysis was similar to that of Schumpeter in Business Cycles. But their notions of malinvestment, structural tensions, and development blocks provided an original explanation of the turning points in the business cycle. The Åkerman–Dahmén approach is more valid for innovation-driven cycles such as the ICT boom in the late 1990s and the subsequent crisis than for cycles with an independent role of financial-market conditions.

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