Permanent and Transitory Components of Business Cycles: Their Relative Importance and Dynamic Relationship

Chang-Jin Kim; Piger, Jeremy; Startz, Richard
January 2001
Working Papers -- U.S. Federal Reserve Board's International Fin;2001, p1
Working Paper
Working Paper
This paper examines the relationship between permanent and transitory components of United States recessions in an empirical model allowing for business cycle asymmetry. Utilizing a common stochastic trend representation for real gross national product (GNP) and consumption, the authors divide real GNP into permanent and transitory components, the dynamics of which are different in booms vs. recessions. The analysis finds evidence of substantial asymmetries in postwar recessions, and that both the permanent and transitory component have contributed to these recessions. This study also allows for the timing of switches from boom to recession for the permanent component to be correlated with switches from boom to recession in the transitory component. Parameter estimates indicate a specific pattern of recessions: switches in the permanent component lead to switches in the transitory component, both when entering and leaving recessions. This working paper can be found at the United States Federal Reserve Board's International Finance Discussion Papers. You can access it by going to http://www.federalreserve.gov/pubs/ifdp/.


Related Articles

  • Peter K.Clark:.  // Brookings Papers on Economic Activity;1984, Issue 2, p565 

    The article presents the author's comments on the article "Unemployment and Potential Output in the 1980s," by Robert J. Gordon that discusses the decline in unemployment rate in the 1980s with reference to the increasing real GNP. He explains that the rapid decline in the unemployment rate...

  • China: 'Double-Dip Recession' On The Cards?  // Emerging Markets Monitor;5/4/2009, Vol. 15 Issue 5, p1 

    The article discusses the recession scenario for China for 2009. The entry notes that a double-dip recession was predicted by economists in December 2008 that will be preceded by a collapse gross domestic product (GDP), fears of deflation and aggressive re-inflation by the Chinese government and...

  • On Measuring Economic Recessions. Renshaw, Edward // Challenge (05775132);Mar/Apr91, Vol. 34 Issue 2, p58 

    This article discusses whether economic recessions should be identified on the basis of sustained declines in employment or production. The most talked about rule for identifying an economic recession is two consecutive quarterly declines in real GNP (gross national product). This rule, however,...

  • Labor Market Behavior during and after the Great Recession: Has It Been Unusual? Tasci, Murat; Treanor, Caitlin // Economic Trends (07482922);Oct2015, p1 

    The article discusses the relationship of labor market and aggregate economy during and after the Great Recession. During the recession their is a decline in gross national product (GDP) and increase in the unemployment rate. After the recession the recovery phase shows that labor market's...

  • An Interim Report on the Polish Economy. Ryan, Leon V.; Hunter Jr., Richard J. // Sarmatian Review;Sep2008, Vol. 28 Issue 3, p1418 

    The article reports on the economic development of Poland. It mentions five economic drivers which propel the Polish economy in 2007-2008, including a major increase in European Union (EU) aid, the heavy boost to infrastructure spending, rising employment and wages and the growing contribution...

  • The Unit Root Hypothesis for Aggregate Output May Not Hold after All: New Evidence from a Panel Stationarity Test with Multiple Breaks. Romero-Ávila, Diego // Southern Economic Journal;Jan2007, Vol. 73 Issue 3, p642 

    This paper investigates the hypothesis of a unit root in output for four panels of real gross domestic product (GDP) and real GDP per capita series in the Organization for Economic Cooperation and Development (OECD). For that purpose, a panel stationarity test is employed that assumes a highly...

  • BURMESE DAZE. Sullivan, Andrew // New Republic;11/2/87, Vol. 197 Issue 18, p18 

    Details the political and economic condition in Burma under the military government. Factors influencing the decline in the country's gross national product; Reason behind the absence of mass revolt against military dictatorship; Pursue of the " Burmese Path to Socialism," a program of austere...

  • Iran: Poor King Midas. Critchfield, Richard // New Republic;9/21/74, Vol. 171 Issue 12, p17 

    Focuses on the economic condition in the Tehran, Iran. Report that rise in foreign exchange earnings up to anywhere between $18 billion and $22 billion and an expected gross national product growth rate of 40 percent; Comment on the social and economic transformation in Iran; Role of Mohammad...

  • Unemployment and Potential Output in the 1980s. Gordon, Robert J. // Brookings Papers on Economic Activity;1984, Issue 2, p537 

    The article presents an analysis of the reasons behind the rapid decline in the unemployment rate in the early 1980s. With the help of Okun's law coefficient, the relationship between the unemployment rate and the real GNP has been established. The rapid rise in GNP in the 1983-1984 recovery...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics