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User:S Linn Linn/Business cycle

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Hamilton expressed that in the post war era, a majority of recessions are connected to an increase in oil price. [1] Commodity price shocks are considered to be a significant driving force of the US business cycle. [2]

Economic indicators are used to measure the business cycle: financial indicators, consumer confidence index, retail trade index, unemployment and industry/service production index. Stock and Watson claim that financial indicators’ predictive ability is not stable over different time periods because of economic shocks, random fluctuations and development in financial systems. [3] Ludvigson believes consumer confidence index is a coincident indicator as it relates to consumer’s current situations. [4] Winton & Ralph state that retail trade index is a benchmark for the current economic level because its aggregate value counts up for two-thirds of the overall GDP and reflects the real state of the economy. [5] According to Stock & Watson, unemployment claim can predict when the business cycle is entering a downward phase. [6] Banbura and Rüstler argue that industry production’s GDP information can be delayed as it measures real activity with real number, but it provides an accurate prediction of GDP. [7]

Series used to infer the underlying business cycle fall into three categories: lagging, coincident, and leading. They are described as main elements of an analytic system to forecast peaks and troughs in the business cycle. [8] For almost 30 years, these economic data series are considered as "the leading index" or "the leading indicators"-were compiled and published by the U.S. Department of Commerce.

Arthur F. Burns and Wesley C. Mitchell define business cycle as a form of fluctuation. In economic activities, a cycle of expansions happening, followed by recessions, contractions, and revivals. All of which combine to form the next cycle's expansion phase; this sequence of change is repeated but not periodic. [9]

Notes

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  1. ^ Hamilton, J. D. (2008). Oil and the macroeconomy, in S. N. Durlauf & L. E. Blume, eds, "The New Palgrave Dictionary of Economics".
  2. ^ Gubler, M., & Hertweck, M.S. (2013). (p. 3-6). "Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S".
  3. ^ Stock, J.H., & Watson, M.W. (1999). (pp. 3-14). "Business Cycle Fluctuations in US Macroeconomic Time Series", Amsterdam: Elsevier.
  4. ^ Ludvigson, S.C. (2004). (pp. 29-45). "Consumer Confidence and Consumer Spending. Journal of Economic Perspectives."
  5. ^ Winton, J., & Ralph, J. (2011). (p. 88). "Measuring the accuracy of the Retail Sales Index. Economic and Labour Market Review".
  6. ^ Stock, J.H., & Watson, M.W. (2003a). (pp. 71-80). "How Did Leading Indicators Forecasts Perform During the 2001 Recession?. Economic Quarterly - Federal Reserve Bank of Richmond".
  7. ^ Banbura, A., & Rüstler, G. (2011). (pp. 333-342). "A Look Into the Factor Model Black Box: Publication Lags and the Role of Hard and Soft Data in Forecasting GDP. International Journal of Forecasting".
  8. ^ The Conference Board (2021). https://conference-board.org/data/bci/index.cfm?id=2151.
  9. ^ Arthur F. Burns and Wesley C. Mitchell. (1946). (p.3). "Measuring Business Cycles."
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