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  3. American Economic Review
  4. January 2020
  5. Putting the Cycle Back into Business Cycle Analysis

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Putting the Cycle Back into Business Cycle Analysis

  • Paul Beaudry
  • Dana Galizia
  • Franck Portier
American Economic Review
vol. 110, no. 1, January 2020
(pp. 1–47)
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Abstract

Are business cycles mainly a response to persistent exogenous shocks, or do they instead reflect a strong endogenous mechanism which produces recurrent boom-bust phenomena? In this paper we present evidence in favor of the second interpretation and we highlight the set of key elements that influence our answer. The elements that tend to favor this type of interpretation of business cycles are (i) slightly extending the frequency window one associates with business cycle phenomena, (ii) allowing for strategic complementarities across agents that arise due to financial frictions, and (iii) allowing for a locally unstable steady state in estimation.

Citation

Beaudry, Paul, Dana Galizia, and Franck Portier. 2020. "Putting the Cycle Back into Business Cycle Analysis." American Economic Review, 110 (1): 1–47. DOI: 10.1257/aer.20190789

Additional Materials

JEL Classification

  • E22 Investment; Capital; Intangible Capital; Capacity
  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • E32 Business Fluctuations; Cycles
  • E44 Financial Markets and the Macroeconomy