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The Shifts in Lead-Lag Properties of the US Business Cycle

Joshua Brault () and Hashmat Khan ()

No 18-03, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: We document shifts in the lead-lag properties of the US business cycle since the mid- 1980s. Specifically, (i) the well-known inverted-leading-indicator-property of real interest rates has completely vanished; (ii) labour productivity switched from positively leading to negatively lagging output and labour inputs over the cycle; and (iii) the unemployment rate shifted from lagging productivity negatively to leading positively. Many contemporary business cycle models produce counterfactual cross-correlations revealing that popular frictions and shocks provide an incomplete account of business cycle comovement. Determining the underlying sources of these shifts in the lead-lag properties is therefore a promising direction for future research.

Keywords: Business Cycles; Cross-Correlations; DSGE Models; Interest Rates; Productivity; Hours; Employment; Unemployment (search for similar items in EconPapers)
JEL-codes: E24 E32 E43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2018-02-12, Revised 2019-03-01
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Published: Carleton Economic Papers

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