International Evidence on the Connection between Business Cycles and Economic Growth

Torben Mark Pedersen and Anne Marie Elmer
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Torben Mark Pedersen: Institute of Economics, University of Copenhagen
Anne Marie Elmer: Ministry of Economic Affairs, Copenhagen

No 98-23, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: We study the hypothesis that there is a connection between business cycles and economic growth. If economic growth and business cycles were completely independent of each other, then changes in the growth rate would be unrelated to dates of business cycle turning points (apart from pure coincidence). This is a testable implication, and we ''test'' for a connection between business cycles and economic growth by comparing the dates of business cycle turning points with the dates of estimated trend breaks using quarterly real GDP for14 OECD countries in the postwar period. We identify business cycle turning points using a computer algorithm and estimate the timing, size, and character of trend breaks using a general intervention model. We identify 34 trend break dates and 79 percent of these trend breaks occur at or near business cycle turning points which we interpret as confirming our hypothesis of a connection between business cycles and economic growth.

Keywords: business cycles; economic growth; trend breaks; structural change; stochastic trends (search for similar items in EconPapers)
JEL-codes: C22 E32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1998-12
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9823

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