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Interaction between Business Cycles and Economic Growth

Sohei Kaihatsu, Maiko Koga, Tomoya Sakata and Naoko Hara
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Maiko Koga: Bank of Japan
Tomoya Sakata: Bank of Japan
Naoko Hara: Bank of Japan

No 18-E-12, Bank of Japan Working Paper Series from Bank of Japan

Abstract: In the aftermath of the recent global financial crisis, advanced economies have faced sluggish recoveries or long-lasting economic slowdowns. This experience has challenged the conventional dichotomy of business cycles and economic growth, which has long been central to macroeconomic analysis. Against this backdrop, we review the literature looking at the relationship between business cycles and economic growth. This study consists of three parts. First, we provide basic ideas about the relationship of business cycles and economic growth, and a simple empirical analysis on economic growth rates in advanced economies. Second, we survey studies which look at the effects of business cycles on economic growth. Specifically, we focus on hysteresis effects caused by labor market structure, firm activity and fiscal policy. Third, we review the literature looking at the effects of economic growth on business cycles, through mechanisms such as technological progress and population ageing.

Keywords: Business cycles; economic growth; hysteresis (search for similar items in EconPapers)
JEL-codes: E32 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gro, nep-knm and nep-mac
Date: 2018-06-20
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