I am reading a paper by Michal Andrle, Jan Brůha, Serhat Solmaz (On the sources of business cycles: implications for DSGE models). The authors use data at a quarterly frequency for their empirical analysis. But they also have this statement in their paper, 'Our empirical approach boils down to a multi-country dynamic principal component analysis of data at business cycle frequencies'.

What does the term 'business cycle frequency' mean? And what does it mean to analyze data at business cycle frequency? I have yet found a simple definition for it.

  • $\begingroup$ Yeah, sure. I have edited my post. Thanks!! $\endgroup$ – Emmanuel Ameyaw Feb 25 at 14:24

Business cycle frequency is a frequency that has the length of one business cycle. Business cycle is:

economy-wide fluctuations in production, trade, and general economic activity. From a conceptual perspective, the business cycle is the upward and downward movements of levels of GDP (gross domestic product) and refers to the period of expansions and contractions in the level of economic activities (business fluctuations) around a long-term growth trend.

The length of the business cycle varies but usually, it is at least a few years.

  • $\begingroup$ If I get it right, it is usually a few years irrespective of whether one uses quarterly, monthly or annual data? $\endgroup$ – Emmanuel Ameyaw Feb 25 at 14:27
  • $\begingroup$ Yes, the sampling frequency of the data - monthly, quarterly, annual - does not matter. The problem with annual data is that it might be low a frequency, and you might miss recessions. As for the length, one might note that business cycles in the developed countries are longer-lived since the 1990s (recessions a decade apart). $\endgroup$ – Brian Romanchuk Feb 25 at 18:48
  • $\begingroup$ @EmmanuelAmeyaw yes it is several years no matter what data are available $\endgroup$ – csilvia Feb 26 at 9:08
  • $\begingroup$ Many thanks. So to 'analyze data at business cycle frequency' as used in research papers don't actually change anything if it is omitted. Whether data is annual, monthly, or quarterly, you can still say we analyze data at business cycle frequency, right? Anyway, I don't really know what that statement means. $\endgroup$ – Emmanuel Ameyaw Mar 1 at 8:26
  • $\begingroup$ @EmmanuelAmeyaw analyzing data at business cycle frequency means that no matter what data you have your time unit will be 1 business cycle. For example, even if you use daily data you can analyze the data on quarterly frequency by aggregating daily observations across a quarter. The same goes for business cycle frequency. Frequency is not about what data you have but what is the length of t used in the study $\endgroup$ – csilvia Mar 1 at 9:13

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