The Effects of Business Cycles on Growth – Time Series Evidence for the G7-countries Using Survey-based Measures of the Business Cycle

Jörg Döpke

CESifo Economic Studies, 2004, vol. 50, issue 2, 333-349

Abstract: The paper analyses whether business cycle fluctuations affect long-run growth. This hypothesis is tested using quarterly time series for the G7-countries. A vector-autoregressive model containing total factor productivity and a survey-based direct measure of the business cycle is estimated. In this vector-autoregression, technology and business cycle shocks are identified based on the assumption that productivity-improving measures need some time and, thus, there is no contemporaneous response of productivity to a business cycle innovation. The results suggest that positive business cycles shocks have a small negative impact on long-run productivity. However, the results appear to be not robust against changes in the empirical model.(JEL E32, O41)

Date: 2004
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