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Cycles and their important shocks: completing the investigation

Published online by Cambridge University Press:  24 May 2024

Max Gillman Open the ORCID record for Max Gillman [Opens in a new window]  and
Adrian Pagan
Max Gillman*
Affiliation:
Department of Economics, University of Missouri-St. Louis, St. Louis, MO, USA Corvinus University of Budapest, Budapest, Hungary European Research University, Havirov, Czech Republic
Adrian Pagan
Affiliation:
School of Economics, University of Sydney, Camperdown, Australia
*
Corresponding author: Max Gillman; Email: gillmanm@umsl.edu
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Abstract

The paper looks at the question of measuring the importance of shocks to cycles. We consider two types of cycles - oscillations and those summarized by the NBER that require a study of growth in activity to establish turning points in the level of activity. The latter demarcate expansions and contractions. We establish a connection between these two concepts of cycles that shows shocks may have very different effects on each. As an application we look at a question that has often been asked over how important technology shocks are to cycles in activity? Some recent research concludes that total factor productivity (TFP) shocks are not important for oscillations and therefore models should be designed to reflect that. Using the same data we show that TFP shocks are very important to both types of cycles.

Keywords

Band pass filteroscillationsbusiness cyclesmain shock
Type
Articles
Information
Macroeconomic Dynamics , First View , pp. 1 - 11
Copyright
© The Author(s), 2024. Published by Cambridge University Press

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