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The business cycle is alive and well

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  • James H. Stock

    (Harvard University)

Abstract

Have the dynamic relations among macro variables changed markedly since the financial crisis? A dynamic factor model provides consistent evidence of stability across 248 variables The Great Moderation appears to be ongoing; you cannot reject the hypothesis that the standard deviation of four-quarter GDP growth is the same over 1984–2007 and over 2008–2018. Even so, the apparent slower GDP growth trend implies a substantial probability that a recession may start in the next 2 years, even not adding the risk that some large unprecedented negative event may occur. Because of low interest rates and already-large deficits, the ability of Congress and the Fed to mitigate the effects of a recession are historically constrained.

Suggested Citation

  • James H. Stock, 2019. "The business cycle is alive and well," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 54(1), pages 79-84, January.
    • Handle: RePEc:pal:buseco:v:54:y:2019:i:1:d:10.1057_s11369-018-00110-7
    DOI: 10.1057/s11369-018-00110-7
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    Cited by:

    1. Sergei Aliukov & Jan Buleca, 2022. "Comparative Multidimensional Analysis of the Current State of European Economies Based on the Complex of Macroeconomic Indicators," Mathematics, MDPI, vol. 10(5), pages 1-29, March.
    2. Mark Vitner & Azhar Iqbal, 2019. "What is going right in manufacturing?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 54(2), pages 114-121, April.

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