Medium-term business cycles

Diego Comin, Mark Gertler

    Research output: Contribution to journalReview article

    Abstract

    Over the postwar period, many industrialized countries have experienced significant medium-frequency oscillations between periods of robust growth versus relative stagnation. Conventional business cycle filters, however, tend to sweep these oscillations into the trend. In this paper we explore whether they may, instead, reflect a persistent response of economic activity to the high-frequency fluctuations normally associated with the cycle. We define as the medium-term cycle the sum of the high-and medium-frequency variation in the data, and then show that these kinds of fluctuations are substantially more volatile and persistent than are the conventional measures. These fluctuations, further, feature significant procyclical movements in both embodied and disembodied technological change, and research and development (R&D), as well as the efficiency and intensity of resource utilization. We then develop a model of medium-term business cycles. A virtue of the framework is that, in addition to offering a unified approach to explaining the high- and mediumfrequency variation in the data, it fully endogenizes the movements in productivity that appear central to the persistence of these fluctuations. For comparison, we also explore how well an exogenous productivity model can explain the facts.

    Original languageEnglish (US)
    Pages (from-to)523-551
    Number of pages29
    JournalAmerican Economic Review
    Volume96
    Issue number3
    DOIs
    StatePublished - 2006

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    Business cycles
    Fluctuations
    Productivity
    Oscillation
    Stagnation
    Technological change
    Resource utilization
    Developed countries
    Persistence
    Filter
    Economic activity

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Medium-term business cycles. / Comin, Diego; Gertler, Mark.

    In: American Economic Review, Vol. 96, No. 3, 2006, p. 523-551.

    Research output: Contribution to journalReview article

    Comin, D & Gertler, M 2006, 'Medium-term business cycles', American Economic Review, vol. 96, no. 3, pp. 523-551. https://doi.org/10.1257/aer.96.3.523
    Comin, Diego ; Gertler, Mark. / Medium-term business cycles. In: American Economic Review. 2006 ; Vol. 96, No. 3. pp. 523-551.
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