Measuring international business cycles by saving for a rainy day

Mario Crucini () and Mototsugu Shintani

Canadian Journal of Economics, 2015, vol. 48, issue 4, 1266-1290

Abstract: Macroeconomics inevitably begins with a trend-cycle decomposition of a nation's output. We propose a decomposition in which consumption is the trend component and savings is the cycle component. Using data from the G-7 plus Australia, we show that this decomposition identifies international business cycles that are: (i) more volatile, (ii) of longer mean duration and (iii) less correlated across countries than the cycle component from the Hodrick-Prescott filter. We argue that this difference stems from the fact that our method imposes a basic theoretical restriction arising from the permanent income hypothesis similar to the restriction used in Cochrane's ( ) decomposition.

JEL-codes: C32 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Journal Article: Measuring international business cycles by saving for a rainy day (2015)
Working Paper: Measuring International Business Cycles by Saving for a Rainy Day (2011)
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