Postwar U.S. Business Cycles: An Empirical Investigation

TLDR

The paper documents features of aggregate economic fluctuations known as business cycles. The study proposes a method to decompose a time series into a smooth trend and a cyclical component. Using quarterly postwar U.S. data, the authors analyze rapid fluctuations that cannot be explained by slow demographic, technological, or capital stock changes, and propose a decomposition into trend and cycle.

Abstract

A study documents some features of aggregate economic fluctuations sometimes referred to as business cycles. The investigation uses quarterly data from the postwar US economy. The fluctuations studied are those that are too rapid to be accounted for by slowly changing demographic and technological factors and changes in the stocks of capital that produce secular growth in output per capita. The study proposes a procedure for representing a times series as the sum of a smoothly varying trend component and a cyclical component. The nature of the comovements of the cyclical components of a variety of macroeconomic time series is documented. It is found that these comovements are very different than the corresponding comovements of the slowly varying trend components.