Questions tagged [business-cycles]

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Debt cycle theory of Ray Dalio

I recently started reading Ray Dalio's book regarding BIG DEBT CRISES. He compared there, economy to the monopoly board game. There is something I don't quite follow in this analogy. If you ...
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1 answer
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What does it mean to detrend a time series at a given rate?

What does it mean to detrend a time series at a given rate, say, 1.5%? What is the formula here? $X_t - trend$? where trend = average growth rate? Say $X_t - 0.015$?
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Is Hodrick-Prescott filter optimal with irregular component?

I need to extract cyclical component from time series, when doing seasonal adjustment I have the option to remove, apart from seasonal component, the irregular component. Then I'll apply HP to the ...
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2 answers
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Austrian business cycle

This video on the Austrian business cycle seems to state that when rates are low this signlas to investors that there is plenty of money to borrow and plenty of resourses to deploy. However I dont ...
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1 answer
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Are business cycle fluctuations usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?

I wonder if business cycle fluctuations are usually studied in a (New Keynesian) DSGE model, or can they also be studied in a growth model?
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Stabilizing Property of a Taylor Rule

Considering the New Keynesian Model we have the Phillips curve and dynamic IS curve in log-linearized form with price shock $u^{\pi}$ and demand shock $u^{IS}$ :$$\pi_t=\beta E_t\pi_{t+1}+\kappa(y_t-...
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0 answers
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What is the best measure for the world's economic cycle?

I'm trying to make a graph that shows how the return of major assets (S&P 500 index, % of 3Y T-notes, oil, gold, etc) move along with the world's expansion& recession cycle. I looked into ...
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1 vote
0 answers
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Implications for Labour after a Productivity Shock, RBC Model

I am trying to understand the implication for labour after a one time productivity shock where $A_t$ follows a AR (1) process with persistence $\rho_A=0.95$. It is stated the following : labour ...
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Inequality and recessions

I was reading about Marx's Crisis Theory. On one hand, there is this idea of the falling surplus. But on the other hand, he relates income inequality to the business cycle. Have his ideas regarding ...
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1 vote
0 answers
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New Keynesian Model Output Gap and Calibration

I am trying to solve following problem regarding the New Keynesian Model: So, I have calculated following equations by using the Taylor Rule, Phillips Curve and IS Curve: $$\pi=\frac{\kappa\phi_y}{(1-...
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2 answers
63 views

Why does global suspension of economic activity result in catastrophic loss/debt?

Covid-19 has forced a suspension of at least 50% of financial transactions and business activities. Materially, not much has been lost: consumables have been spared, equipment is dormant, ...
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1 vote
1 answer
1k views

Am I correct that cyclical unemployment can be negative?

Let's start with stating and emphasizing some truths that we will need later. Overall unemployment rate=Frictional unemployment + Structural unemployment + Cyclical unemployment. Also, Natural rate of ...
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3 answers
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Model of economic cycles consistent with efficient market hypothesis

I do not have background in economics, so my question may be naive or I might have taken incorrect assumptions somewhere. As far as I understand, efficient market hypothesis applies, saying that the ...
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1 answer
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extensive vs intensive labor in US in recent decades

Total Hours worked is a mix of extensive (to work or not, the usual standard working week) and intensive (how many hours to work). I'm interested in how this balance of extensive and intensive ...
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4 votes
3 answers
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Can the coming recession - or any recession - be avoided?

I keep reading about all these warning signs of a coming recession, and I have a very silly question: If we can see it coming, why can't we do something about it now, instead of after we are deep in ...
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1 answer
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On a Dalio youtube video

The following video https://www.youtube.com/watch?v=PHe0bXAIuk0 argues that credit is the principal force behind the business cycle. Is this considered to be a established truth within some school ...
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2 answers
130 views

Inflation leads to loss of gold reserves

I am reading Murray's Rothbard "What has government done to our money?" and this is his reasoning for inflation leading to loss of gold reserves to other countries (assuming everyone is on ...
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2 answers
43 views

Empirical research into sectoral comovement

I'm looking for some empirical studies into sectoral comovement. In particular, I'm interested in how manufacturing and services industries move together both in the long run and over the course of a ...
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1 answer
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Question Regarding 'Potential Output'

I am learning about potential output. We have been told that it is the amount of output that an economy can produce when using its resources, such as capital and labour, at normal rates/maximum ...
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1 answer
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Why are real interest rates so non-volatile compared to investment?

Intuitively I would guess that real interest rates are highly related to investment. But there is a very low interest rate volatility, compared to investment: log investment is about 20 times more ...
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2 votes
1 answer
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Understanding the HP Filter

The HP Filter has two objectives, with the importance of each objective denoted by the user given value of lambda: Objective 1: minimize the $\tau_t$ in the term in the square brackets such that we ...
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2 votes
2 answers
365 views

Using metrics provided by FRED to identify the business cycle

I am interested to see how the "business cycle" is associated with our firms sales. The hope is that if we can show that our sales line up with the business cycle then we can make decisions ...
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2 votes
0 answers
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Kiyotaki-Moore v.s. Bernanke-Gertler-Gilchrist - what's the difference?

What are the key differences between (i) a model which features a "Kiyotaki-Moore collateral constraint"; and (ii) a model which incorporates a "financial accelerator" (a la Bernanke-Gertler-Gilchrist)...
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1 vote
1 answer
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What are the assumptions of real business cycle theory and Keynesian theory?

What are the differences between the approaches of Keynes and Real Business Cycle theorists? What are the assumptions made by both the theories? How do they differ in their methodology? Do they ...
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-2 votes
1 answer
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Causality: Money supply and prices

When there is an increase in price level, real money supply decreases and raises interest rates. In a similar situation, when money supply decreases, interest rates increases, consumption decreases, ...
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9 votes
1 answer
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No Ponzi game condition and transversality condition are the same?

Given the following non-stochastic planning problem with finite horizon, \begin{align} &\max_{\{k_{t+1}\}}\sum^T_{t=0}\beta^tU[f(k_t-k_{t+1})] \\ \text{s.t. } & 0\leq k_{t+1}\leq f(k_t)\\ &...
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2 votes
0 answers
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Are there times when firms compete more with each other?

I have the impression that sometimes firms are fiercely competing with each other, innovating and trying to gain market share and other times when firms are just hanging on. Are there any references ...
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5 votes
4 answers
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Lucas Cost of Business Cycles

I am trying to understand the logic behind Lucas attempting to analyse the potential benefits of eliminating business cycles by attempting to calculate the percentage of income that individuals would ...
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1 vote
1 answer
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Is there a change over the business cycle in how much of economic activity is market-based?

Out of the total production in an economy, a big part is market-based, as when you make something and sell it. But a big part is not, as when you make something and don't sell it, but exchange it or ...
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6 votes
2 answers
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What fraction of new businesses die out within a year?

Is there a simple way to figure out how many new businesses appear and disappear each year in the US economy? It seems a key question to figure out how the economy is changing over time, although I ...
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2 votes
1 answer
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Is the basic RBC model a weak model?

There are a plethora of examples of weaknesses in my textbook, such as: The Walrasian assumption Not including nominal shocks Not including indivisible labour Not including distortionary taxes Not ...
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1 vote
0 answers
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Lack of historical data for calibration of probability of default

It is a known fact that default rates seem to exhibit cyclic behavior. Most probability of default models use one-year averages of default rates to calibrate the models. The one-year averages should ...
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1 vote
1 answer
5k views

The period of the business cycle in which the real GDP is increasing is called the?

The period of the business cycle in which the real GDP is increasing is called the? And no, this is not an homework question. I'm a college student and we starting our exams soon. I'm just going ...
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1 vote
0 answers
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Amazon's 1-Click Check Out : any feedback? [closed]

Does anyone have feedbacks or analysis on Amazon's 1-Click Check Out ? Any numbers about the conversion rates (before/after using the 1-click checkout button) , etc. ? This page is about a $300 ...
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2 votes
2 answers
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Who first formulated the Political Business Cycle Theory?

The first time I saw it, was in Stephen Harper's Master's Thesis http://dspace.ucalgary.ca/bitstream/1880/24345/1/1991_Harper.pdf It comes across as being very similar to the Austrian Business Cycle ...
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2 votes
2 answers
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Hypothetical Long-term Business Cycle

I was looking through my textbook on Money, Banking, and the Economy and I came to the chart of the hypothetical short-term business cycle deviating around an upward sloping long-term cycle trend. My ...
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2 votes
0 answers
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Separation shock and business cycles

In the context of the Diamonds-Mortensen-Pissarides models, there was a reasoning why a separation shock cannot fit business cycles. I think it was brought forward by Shimer, but I could be wrong. ...
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5 votes
2 answers
131 views

Overview: Crises and their causes

There have been many business cycles in the US over the past 50 years (although less so since the great moderation). Many of us youngsters are too young to remember many of these. Is there some ...
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10 votes
2 answers
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Simulating Real Business Cycle

Basically I need to replicate Hartley's 'A User's Guide to Solving Real Business Cycle Models' (http://www.econ.ucdavis.edu/faculty/kdsalyer/LECTURES/Ecn235a/Linearization/ugfinal.pdf). Specifically, ...
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3 votes
1 answer
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Firm Sizes over the business cycle

There has been a lot of evidence about the firm size distribution (as measured in employment) being Pareto (see for example Luttmer 2007), but what are the properties of this distribution over the ...
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5 votes
1 answer
519 views

Are profits procyclical?

This is somewhat related, but distinct from Cyclicality of Markups Basically, I'm looking for papers on whether firms profits are (on average) procyclical or not, and I appreciate theoretical, but ...
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2 votes
1 answer
269 views

Is the S&P 500 now in a boom-bust cycle?

This question was originally posted at money.stackexchange but was moved here per a commentor's suggestion after the question was put on hold for being opinion-based. The original question was: ...
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4 votes
1 answer
134 views

Does RBC models pin down equilibrium output, amount of labor and capital without initial condition?

In ordinary equilibrium models, we can pin down equilibrium quantity by supply-demand functions. Is this the same in RBC models? Can we pin down equilibrium output and amount of labor and capital ...
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8 votes
1 answer
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Credit Frictions as the source of Business Cycles

Many papers look at the impact of credit frictions onto business cycles, and they almost unambiguously find that credit frictions work as an amplification mechanism of other shocks. For example, ...
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10 votes
2 answers
182 views

Schumpeterian Business Cycles

The basic idea of Schumpeterian Business Cycles is that new technologies require creative destruction but will yield positive growth. These two opposing forces have impacts onto the real economy at ...
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