TY  - JOUR
AU  - McKay,Alisdair
AU  - Reis,Ricardo
TI  - The Brevity and Violence of Contractions and Expansions
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12400
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12400
L1  - http://www.nber.org/papers/w12400.pdf
N1  - Author contact info:
Alisdair McKay
Boston University
Dept. of Economics
270 Bay State Road
Boston, MA 02215
Tel: 617-353-6324
E-Mail: amckay@bu.edu

Ricardo Reis
Department of Economics, MC 3308
Columbia University
420 West 118th Street, Rm. 1022 IAB
New York  NY  10027
Tel: 212-851-4007
Fax: 212-854-8059
E-Mail: rreis@columbia.edu
AB  - Early studies of business cycles argued that contractions in economic activity were briefer (shorter) and more violent (rapid) than expansions. This paper systematically investigates this claim and in the process discovers a robust new business cycle fact: expansions and contractions in output are equally brief and violent but contractions in employment are briefer and more violent than expansions. The difference arises because employment typically lags output around peaks but both series roughly coincide in their troughs. We discuss the performance of existing business cycle models in accounting for this fact, and conclude that none can fully account for it. We then show that a simple model that combines three familiar ingredients%u2013labor hoarding, a choice of when to scrap old technologies, and job training or job search%u2013can account for the business cycle fact.
ER  -