NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

What's Real About the Business Cycle?

James D. Hamilton

NBER Working Paper No. 11161
Issued in February 2005
NBER Program(s):   EFG

This paper argues that a linear statistical model with homoskedastic errors cannot capture the nineteenth-century notion of a recurring cyclical pattern in key economic aggregates. A simple nonlinear alternative is proposed and used to illustrate that the dynamic behavior of unemployment seems to change over the business cycle, with the unemployment rate rising more quickly than it falls. Furthermore, many but not all economic downturns are also accompanied by a dramatic change in the dynamic behavior of short-term interest rates. It is suggested that these nonlinearities are most naturally interpreted as resulting from short-run failures in the employment and credit markets, and that understanding these short-run failures is the key to understanding the nature of the business cycle.

download in pdf format
   (300 K)

email paper

This paper is available as PDF (300 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Hamilton, James D. "What's Real About The Business Cycle?," FRB St. Louis - Review, 2005, v87(4,Jul/Aug), 435-452.

Users who downloaded this paper also downloaded these:
Chauvet and Hamilton w11422 Dating Business Cycle Turning Points
Rebelo w11401 Real Business Cycle Models: Past, Present, and Future
Schmitt-Grohe and Uribe w14215 What's News in Business Cycles
Hamilton w14492 Understanding Crude Oil Prices
Hamilton w7755 What is an Oil Shock?
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us