Business cycles and productivity growth: Are temporary downturns productive or wasteful?

This paper investigates the relationship between the structure of the business cycle and total factor productivity (TFP) growth in U.S. manufacturing. Previous empirical studies on cycle-growth interactions have been conducted at the aggregate level, and have produced mixed results. In contrast, we examine the dynamic linkages between temporary employment shocks and TFP at the industry level, using the NBER Productivity Database. Given the substantial differences in factor intensities, costs and the nature of innovation and productivity-enhancing activities across industries, there are good reasons why cycle-growth interactions may be more readily captured at the sectoral level. We construct an exactly identified Vector Autoregressive model for employment and TFP growth, and find strong support for the “opportunity-cost” view of business cycle-productivity growth interaction. This result suggests that recessions can lead to TFP growth through reorganization and restructuring effects. On the other hand, we find little support for the notion that temporary booms increase TFP through “learning-by-doing” effects. The responsiveness of TFP to employment shocks also seems to be related to the degree of job reallocation within individual industries and the capital intensity of the industry in question. This is further evidence in favour of the view that employment shocks can trigger reorganization effects. Finally, we suggest possible future avenues for this research, including the adjustment of TFP measures to allow for variable factor utilization over the cycle.     

Capacity utilization and technology shocks in the US manufacturing sector

The ability of real business cycle models to generate reasonable aggregate fluctuations depends on the time series properties of technology shocks measured by the change of total factor productivity. Three specifications of a non‐parametric productivity analysis which correct to different degrees for variations of capacity utilization are compared in this article using data for three‐ and four‐digit US manufacturing industries during the years 1958–1996. The results show that correcting for utilization generally leads to substantially smaller technology shocks that are less strongly correlated with growth of output and hours. Moreover, the probability of technological regress is considerably lower after the correction.     

中国城市化水平与产业生产率增长的实证研究

对1978-2008年中国城市化水平对第二产业和第三产业生产率增长的影响进行实证分析,结果显示：城市化对产业增长的影响有着类似于全要素生产率（TFP）的作用;城市化对产业生产率增长的技术效应和要素重置效应都有贡献。这表明,城市发展对产业增长形成了要素的集聚效应和重置效应,促进了产业生产率的提高;但工资成本的上升不利于产业生产率的增长。     

Capacity constraints, asymmetries, and the business cycle

We study how an occasionally binding capacity constraint affects the properties of business cycles. A real business cycle model is constructed where production takes place at individual plants and the number of plants operated varies over the cycle. The capacity constraint binds in states where all plants are operated. We derive the aggregate production function for this economy, which turns out to differ from the standard Cobb–Douglas function while retaining its desirable properties. The business cycle features of this one-sector growth model are similar to those of a standard real business cycle model in most respects. Our model does, however, display some properties of actual economies that standard models do not. In particular, business cycles in our model are asymmetric—troughs are deeper on average than peaks are tall. Also, labor's share of income is counter-cyclical, as it is in US data.     

Sectoral and Aggregate Technology Shocks:Is There a Relationship?

We analyze sector-specific shocks in productivity and demand in 19 manufacturing sectors of the Austrian economy. Based on a structural vector autoregressive model (SVAR) with long-run restrictions developed by Galí (1999) we extract technology and non-technology shocks from sectoral and aggregate data. We study their patterns and relationship by means of a principal components analysis and find a close association of sectoral and macroeconomic non-technology shocks but only a very weak association for technology shocks. Impulse response analysis indicates that for almost all manufacturing sectors as well as the aggregate Austrian economy productivity growth rates experience an immediate increase due to positive technology shocks while hours worked decline. Thereby we confirm Galís results on the level of Austrian manufacturing industries. From regression analysis, we find that our shocks are closely associated to employment growth and output growth but not to investment growth and that the reaction is different for the aggregate economy and manufacturing industries.JEL codes: D24, E23, E32, O30We thank Werner Müller and the participants of the 2004 conference of the Austrian Economic Association (NOeG) for helpful comments. We would like to thank an anonymous referee for many helpful comments that led to a substantial improvement of the paper. The usual disclaimer applies. This research project was supported by a research Grant (Project Nr. 9800) of the Jubiläumsfonds der Österreichische Nationalbank (OeNB).     

The effect of remittances prior to an election

The objective of the article is to assess whether remittances have an influence on political manipulation, which may occur prior to an election, through an increase in the government consumption-to-GDP ratio. We combine data from the National Elections across Democracy and Autocracy data set compiled and discussed in Hyde and Marinov (2012) and the World Development Indicators data set. We focus on 70 developing countries over the period 1990–2010. It appears that the political budget cycle is reduced up to the point where it is fully cancelled out at a remittance threshold of 10.7% of GDP. Those findings are robust to different robustness checks.     

New directions in business cycle research and financial analysis

This paper serves as a partial introduction to and survey of the literature on Markov-switching models. We review the history of this class of models, describe their mathematical structure, and exposit the basic ideas behind estimation and inference. The paper also describes how the approach can be extended in a variety of directions, such as non-Gaussian distributions, time-varying transition probabilities, vector processes, state-space and GARCH models, and surveys recent methodological advances. The contributions of the other papers in this volume are reviewed. A final section offers conclusions and implications for policy. First Version Received: August 2001/Final Version Received: October 2001     

On the measurement and analysis of aggregate economic activity for China: the coincident economic indicators approach

This paper reviews some of China's high-frequency economic indicators and our principal findings on their selection and use. Our aim is to develop a composite index of coincident economic indicators (coincident economic index, CEI) which can be used to obtain timely information on the present state of the China's economy and provide an appropriate measure to analyze China's short-term macroeconomic dynamics. Notably, combining industrial production, retail sales, manufacturing employment, income of financial institutions and passenger traffic volume, they work well as the method for dating business cycles for China. It shows that, over the past two decades, there was one marked recession which occurred in 1988:8 to 1989:12. In addition to this business cycle chronology we also develop a growth cycle chronology based on the deviations from trend of the CE which shows that there have been four cyclical slowdowns since 1986. Whereas GDP growth lacks cyclical movements and appears to be dominated by trend and irregular movements, in contrast to GDP, the CEI works well as a measure of cyclical dynamics and can contribute to the analysis of short-term fluctuations of Chinese economic activity relative to its long-term growth.     

Determinants of co-movement and of lead and lag behavior of business cycles in the Eurozone

In this paper we study business cycle correlations in the Eurozone and its determinants. Additionally, we also analyze the determinants of the lead and lag behavior of business cycles in the Eurozone. We explore the relevance, in the Eurozone context, using GDP and employment as the business cycle measures, of the determinants of business cycle synchronization identified in the literature, namely bilateral trade intensity, dissimilarity of labor market rigidity, dissimilarity in industrial structures, financial openness, and foreign direct investment relations. We estimate a simultaneous 4-equations model by Ordinary Least Squares (OLS) and three-stage least square to investigate empirically the above-mentioned determinants of business cycle correlation. Bilateral trade relations present a positive influence on business cycle correlations, while the dissimilarity of labor market rigidity presents a negative influence. The rest of the above-mentioned variables are non-significant. These results are robust to the use of the Hodrick–Prescott-filter and first differences as the de-trending methods, as well as the use of GDP as the business cycle measure, excluding the financial crisis years (2008 and 2009). Results for employment as the business cycle measure are in contrast with the previous ones, and found industrial dissimilarity to be the relevant variable to determine business cycles synchronization. In what concerns the determinants of the lead and lag behavior, results show that the member states of the Eurozone that usually lead the cycle are the ones that are wealthier, with strict employment legislation, more specialized in construction and finance sectors, and more prone to international capital movements. Differences in the determinants between contemporaneous business cycles and lead and lag behavior of business cycles are especially important for policy-makers in the Eurozone to know about, in particular if asymmetric shocks between countries are set in place.     

Dating the ‘world business cycle’

By mid-2008 the world was witnessing the unfolding of a relatively rare macroeconomic phenomenon, namely, the onset of what one might call a synchronized international – or ‘world’ – recession. But what exactly is a ‘synchronized world recession’? This article proposes a practical definition of a ‘synchronized world recession’ and a putative set of historical post-WWII dates for a ‘world business cycle chronology’. Further, using a constructed ‘world coincident index of economic indicators’ and an associated ‘world leading index of economic indicators’, this article demonstrates that evidence was available from early in the second half of 2007 that the world was indeed sliding inexorably towards its fourth synchronized world recession since WWII (although, interestingly, already its second of the twenty-first century!).     

Dynamic employment adjustments over business cycles

This paper uses U.S. monthly industrial production employment data between 1964 and 2000 to examine the dynamic labor adjustments of production workers and nonproduction workers in both the short and long-run. The results from the short-run analysis show that the dynamic adjustment of production workers is consistent with business cycles. However, the adjustment of nonproduction workers is relatively fixed, lags behind the shocks over business cycle changes, and exhibits the quasi-fixed factor property. In the long-run, we found that nonproduction workers and production workers are cointegrated indicating that the two series are in long-run equilibrium.First version received: March 2002/Final version received: November 2003We would like to thank James McClure, participants in the Economics Department seminar series at Ball State University, and an anonymous referee for their comments and suggestions.     

Endogenous Growth Cycles in Continuous Time

The endogenous dynamics of a closed constant returns multi-market economy are examined in which agents face downward sloping demand. The trigger for growth in this model is a technological change that warrants costly adjustment in input quantities by agents. In the resulting dynamic game, relative prices within markets remain constant. Consequently, all own price elasticities are constant. In markets characterized by lower cost of capital the unique outcome is collusion in which agents do not incur adjustment cost and there is no adoption of new technology. But in other markets a unique non-cooperative equilibrium exists in which agents do incur the cost of adopting the new technology. Only three specifications of adjustment costs are feasible. Output increases along an S-shaped time path with or without a non-explosive cyclical component.     

Do economies stall?

A ‘stalling’ economy has been defined as one that experiences a discrete deterioration in economic performance following a decline in its growth rate to below some threshold level. We examine the international evidence for stalling in a panel of 51 economies using two different definitions of a stall threshold (time-invariant and related to lagged average growth rates). We find that the evidence for stalling is limited: only 7–12 of the economies in our sample experience statistically significant stalls at the 5% level based on any one definition.