Profits encourage investment, investment dampens profits, government spending does not prime the pump — A DAG investigation of business-cycle dynamics

José Tapia Granados ()

MPRA Paper from University Library of Munich, Germany

Abstract: NIPA data of the US economy for the years 1929-2013 are used to test major views about the business cycle. Direct acyclic graphs (DAGs) are used for identification purposes, i.e., as tool to elucidate causal issues. Results show that (a) investment is not autonomous, as it is stimulated by profits and consumption, and damped by government spending; (b) profits are reduced by past investment; (c) government spending appears as an endogenous variable, as both business investment and profits have negative effects on it. Regularities identified in the data are sufficient to generate the cycle. Considering the results, the “regularity” of the business cycle, and the fact that profits stagnated in 2013 and declined in 2014 after growing between 2008 and 2012, it can be concluded with reasonable confidence that a recession will occur in the next few years.

Keywords: business cycle; DAG; causality; macroeconomics (search for similar items in EconPapers)
JEL-codes: E30 E32 E37 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/64698/1/MPRA_paper_64698.pdf original version (application/pdf)

Related works:
Working Paper: Profits encourage investment, investment dampens profits, government spending does not prime the pump — A DAG investigation of business-cycle dynamics (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:64698

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().