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The Stylized Facts about the Business Cycle. Output fluctuations in GDP are persistent Expenditure consumption is procyclical and less volatile than GDP investment is procyclical and 5 times as volatile as GDP government expenditures are acyclical Productivity - PowerPoint PPT Presentation
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Nominal GDP, C, I and G
0.0
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
1946
1949
1952
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
Nominal GDP Nominal Consumption Nominal Investment Nominal Gov.Spend.
Real GDP, C, I and G
0
1
2
3
4
5
6
7
8
Real GDP Real C Real I Real G
Fraction of GDP allocated to C, I and G
0
10
20
30
40
50
60
70
80
C I G
Real GDP and Trend GDP
-50
0
50
100
150
200
19
47
19
49
19
51
19
53
19
56
19
58
19
60
19
62
19
65
19
67
19
69
19
71
19
74
19
76
19
78
19
80
19
83
19
85
19
87
19
89
19
92
19
94
19
96
19
98
20
01
20
03
20
05
Log Real GDP Trend Log Real GDP
Cyclical GDP
-5
-4
-3
-2
-1
0
1
2
3
4
5
Cyclical Log Real GDP
Cyclical GDP and C
-5
-4
-3
-2
-1
0
1
2
3
4
5
Cyclical Log Real GDP Cyclical Log Real Consumption
Cyclical GDP and C
-6
-4
-2
0
2
4
6
-8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00
GDP
C
C Linear (C)
Cyclical GDP and I
-20
-15
-10
-5
0
5
10
15
20
Cyclical Log Real GDP Cyclical Log Real Investment
Cyclical GDP and I
-20
-15
-10
-5
0
5
10
15
20
-8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00
GDP
I
C Linear (C)
Cyclical GDP and G
-20
-15
-10
-5
0
5
10
15
Cyclical Log Real GDP Cyclical Log Government Spending
Cyclical GDP and G
-20
-15
-10
-5
0
5
10
15
20
-8.00 -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00
GDP
G
G Linear (G)
Employment
-4
-3
-2
-1
0
1
2
31
94
8
19
50
19
53
19
56
19
59
19
61
19
64
19
67
19
70
19
72
19
75
19
78
19
81
19
83
19
86
19
89
19
92
19
94
19
97
20
00
20
03
20
05
Pe
rce
nta
ge
De
via
tio
n f
rom
Tre
nd
Employment
Cyclical GDP and APL
-6
-4
-2
0
2
4
6
Cyclical Log Real GDP Cyclical Log Average Productivity of Labor
Table 2: Cyclical Behavior of the US Economy: Deviations from Trend of Expenditure Components, 1954:I-1991:II
Cross-Correlation of Output with:
Variable
SD X(-3) X(-2) X(-1) X X(+1) X(+2) X(+3)
GDP 1.72 .38 .63 .85 1 .85 .63 .38
C 1.27 .57 .72 .82 .83 .67 .46 .22
I 8.24 .38 .59 .79 .91 .76 .50 .22
G 2.04 -.03 -.01 -.01 .04 .08 .11 .16
Exp 5.53 -.29 -.10 .15 .37 .50 .54 .54
Imp 4.88 .31 .45 .62 .72 .71 .52 .28
Data Source: NIPA. All data are deflated and HP filtered
Table 1: Cyclical Behavior of U.S. Labor Market Aggregates, 1954:I-1991:II
Cross-Correlation of Real GDP with:
VariableVolatilit
y (%SD)
X(-5) X(-4) X(-3) X(-2) X(-1) XX(+1
)X(+2
)X(+3
)X(+4
)X(+5
)
Real Gross Domestic Product
1.72 -.02 .16 .38 .63 .85 .85 .63 .38 .16 -.02
Hours (Household Survey) 1.49 -.10 .05 .25 .46 .70 .86 .85 .74 .58 .38 .17
Employment 1.09 -.17 -.03 .16 .38 .63 .83 .88 .80 .65 .46 .25
Hours per Worker 0.54 .07 .20 .36 .49 .64 .70 .58 .42 .28 .12 -.02
GDP/Hours 0.87 .12 .23 .33 .47 .50 .51 .22 -.01 -.24 -.32 -.34
Average Hourly Real Compensation(Business Sector)
0.93 .35 .39 .41 .43 .41 .35 .25 .16 .05 -0.7 -.18
Real Employee Compensation (NIPA)/Hours (Household Survey)
0.65 -.11 -.11 -.13 .06 .02 .10 .13 .14 .10 .08 .04
Cross-Correlation of *:
Employment and Average Labor Productivity** (X)
1.09 .73 .68 .57 .35 .09 -.15 -.32
Vacanciesand Unemployment (X)
12.54 -.36 -.61 -.82 -.95 -.93 -.77 -.54
GNP and Labor Share (X) 1.07 -.61 -.73 -.78 -.74 -.48 -.22 -.00
Source: Finn E. Kydland (1995), (*) Source: M. Merz (1995) using CITIBASE data for the period 1959:I-1988:II, (**) Average Labor Productivity is defined as Real GNP over Employment
The Stylized Facts about the Business Cycle
• Output
– fluctuations in GDP are persistent
• Expenditure
– consumption is procyclical and less volatile than GDP
– investment is procyclical and 5 times as volatile as GDP
– government expenditures are acyclical
• Productivity
– the average output per hour of work is somewhat procyclical and leads the cycle
The Stylized Facts about the Business Cycle
• Labor Markets
– employment volatility accounts for 2/3 of the volatility of total hours
– hours-per-worker volatility accounts for 1/3 of the volatility of total hours
– employment is procyclical lags the cycle
– hors-per-worker are procyclical and lead the cycle
– total hours are procyclical and almost as volatile as GDP
References
• Chapters 2 and 3 in Williamson
• Check-out the website of the National Bureau of Economic Research http://www.nber.org
• Check-out the book "Frontier of Business Cycle Research," ed. T. Cooley, 1995, Princeton University Press