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Recessions and Recoveries in Real Business Cycle Models

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  • Balke, Nathan S
  • Wynne, Mark A

Abstract

The authors evaluate the ability of a simple real business cycle model to generate business cycles in the classical NBER sense of the term, where recessions are periods of absolute declines in economic activity. They use the 'phase' classification of Arthur F. Burns and Wesley C. Mitchell (1946) to determine the 'shape' of the business cycle and to look for asymmetries between expansions and contractions. The authors show that such a model can generate business cycles of plausible duration and depth but cannot match the actual 'shape' of the business cycle. Nonlinear models, such as Milton Friedman's (1993) 'plucking' model may more closely match the observed shape. Copyright 1995 by Oxford University Press.

Suggested Citation

  • Balke, Nathan S & Wynne, Mark A, 1995. "Recessions and Recoveries in Real Business Cycle Models," Economic Inquiry, Western Economic Association International, vol. 33(4), pages 640-663, October.
    • Handle: RePEc:oup:ecinqu:v:33:y:1995:i:4:p:640-63
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    Cited by:

    1. Claessens, Stijn & Kose, M. Ayhan & Terrones, Marco E., 2012. "How do business and financial cycles interact?," Journal of International Economics, Elsevier, vol. 87(1), pages 178-190.
    2. Miriam Steurer & Robert J. Hill & Markus Zahrnhofer & Christian Hartmann, 2012. "Modelling the Emergence of New Technologies using S-Curve Diffusion Models," Graz Economics Papers 2012-05, University of Graz, Department of Economics.
    3. M. Ayhan Kose & Naotaka Sugawara & Marco E. Terrones, 2020. "Global Recessions," Working Papers 162, Peruvian Economic Association.
    4. Kiani, Khurshid M., 2016. "On business cycle fluctuations in USA macroeconomic time series," Economic Modelling, Elsevier, vol. 53(C), pages 179-186.
    5. Pedersen, Torben Mark & Elmer, Anne Marie, 2003. "International evidence on the connection between business cycles and economic growth," Journal of Macroeconomics, Elsevier, vol. 25(2), pages 255-275, June.
    6. Beatriz C. Galvao, Ana, 2002. "Can non-linear time series models generate US business cycle asymmetric shape?," Economics Letters, Elsevier, vol. 77(2), pages 187-194, October.
    7. Francois, P. & Lloyd-Ellis, H., 2001. "Animal Spirits Meets Creative Destruction," Other publications TiSEM d583b352-a7f4-434f-8731-9, Tilburg University, School of Economics and Management.
    8. Maliar, Lilia & Maliar, Serguei, 2004. "Endogenous Growth And Endogenous Business Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 8(5), pages 559-581, November.
    9. Hall, Viv B. & McDermott, C. John, 2015. "Recessions and Recoveries in New Zealand’s Post-Second World War Business Cycles," Working Paper Series 4688, Victoria University of Wellington, School of Economics and Finance.
    10. Guha, Debashis & Hiris, Lorene, 2002. "The aggregate credit spread and the business cycle," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 219-227.
    11. Scott Freeman & Dong-Pyo Hong & Dan Peled, 1999. "Endogenous Cycles and Growth with Indivisible Technological Developments," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(2), pages 402-432, April.
    12. Viv B. Hall & C. John McDermott, 2016. "Recessions and recoveries in New Zealand's post-Second World War business cycles," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(3), pages 261-280, September.
    13. M. Ayhan Kose & Prakash Loungani & Marco E. Terrones, 2013. "From the Global to the National Cycle: An Intricate Liaison," Pacific Economic Review, Wiley Blackwell, vol. 18(3), pages 370-402, August.
    14. Pablo Mejía-Reyes & Reyna Vergara-González, 2017. "Are More Severe Recessions Followed by Stronger Early Expansions of Employment in the Mexican States?," The Review of Regional Studies, Southern Regional Science Association, vol. 47(3), pages 243-269, Fall.
    15. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
    16. Pablo Mejía-Reyes & Reyna Vergara-González, 2015. "Are more severe recessions followed by stronger recoveries? Evidence from the Mexican states employment," ERSA conference papers ersa15p1223, European Regional Science Association.

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