Statistical Evidence of Falling Profits as Cause of Recession

José Tapia Granados ()

Review of Radical Political Economics, 2012, vol. 44, issue 4, 484-493

Abstract: Data on 251 quarters of the U.S. economy show that recessions are preceded by declines in profits. Profits stop growing and start falling four or five quarters before a recession. They strongly recover immediately after the recession. Since investment is to a large extent determined by profitability and investment is a major component of demand, the fall in profits leading to a fall in investment, in turn leading to a fall in demand, seems to be a basic mechanism in the causation of recessions. JEL codes : E01, E11, E32

Keywords: business cycles; recessions; profits; national accounts (search for similar items in EconPapers)
Date: 2012
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