TY - JOUR AU - Comin,Diego AU - Gertler,Mark TI - Medium Term Business Cycles JF - National Bureau of Economic Research Working Paper Series VL - No. 10003 PY - 2003 Y2 - September 2003 UR - http://www.nber.org/papers/w10003 L1 - http://www.nber.org/papers/w10003.pdf N1 - Author contact info: Diego A. Comin Harvard Business School Soldiers Field Boston, MA 02163 Tel: 617/495-5011 E-Mail: dcomin@hbs.edu Mark Gertler Department of Economics New York University 269 Mercer Street, 7th Floor New York, NY 10003 Tel: 212/998-8931 Fax: 212/995-4186 E-Mail: mark.gertler@nyu.edu AB - Over the postwar, the U.S., Europe and Japan have experienced what may be thought of as medium frequency oscillations between persistent periods of robust growth and persistent periods of relative stagnation. These medium frequency movements, further, appear to bear some relation to the high frequency volatility of output. That is, periods of stagnation are often associated with significant recessions, while persistent booms typically are either free of recessions or are interrupted only by very modest downturns. In this paper we explore the idea of medium term cycles, which we define as reflecting the sum of the high and medium frequency variation in the data. We develop a methodology for identifying these kinds of fluctuations and then show that a number of important macroeconomic time series exhibit significant medium term cycles. The cycles feature strong procyclical movements in both disembodied and embodied technological change, research & development, and the efficiency of resource utilization. We then develop a model to explain the medium term cycle that features both disembodied and embodied endogenous technological change, along with countercyclical markups and variable factor utilization. The model is able to generate medium term fluctuations in output, technological change, and resource utilization that resemble the data, with a non-technological shock as the exogenous disturbance. In particular the model offers a unified approach to explaining both high and medium frequency variation in aggregate business activity. ER -