The business cycle is alive and well

James H. Stock ()
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James H. Stock: Harvard University

Business Economics, 2019, vol. 54, issue 1, No 8, 79-84

Abstract: Abstract Have the dynamic relations among macro variables changed markedly since the financial crisis? A dynamic factor model provides consistent evidence of stability across 248 variables The Great Moderation appears to be ongoing; you cannot reject the hypothesis that the standard deviation of four-quarter GDP growth is the same over 1984–2007 and over 2008–2018. Even so, the apparent slower GDP growth trend implies a substantial probability that a recession may start in the next 2 years, even not adding the risk that some large unprecedented negative event may occur. Because of low interest rates and already-large deficits, the ability of Congress and the Fed to mitigate the effects of a recession are historically constrained.

Keywords: Business cycle; Dynamic factor models; Great moderation; Monetary policy (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1057/s11369-018-00110-7

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