We study the real business cycles in China between 1954-2006, and examine the changes after 1978 when China started its market-oriented reforms. To better understand the real business cycle phenomena in China, we develop several estimations to overcome the data problems and improve the business cycle measurement, in particular the consumption, investment, employment and labor hours. We find tha...

Current explanations why a growing economy necessarily goes through booms and recessions predict countercyclical R&D investment. As this is very controversial from an empirical perspective, a stochastic Poisson model of endogenous business cycles and growth is presented where the determinants of the cyclical behaviour of R&D investment are analytically studied. Providing an explicit expression ...

According to the conventional view of the business cycle, fluctuations in output represent temporary deviations from trend. The purpose of this paper is to question this conventional view. If fluctuations in output are dominated by temporary deviations from the natural rate of output, then an unexpected change in output today should not substantially change one's forecast of output in, say, fiv...

We study the real business cycles in China between 1954-2006, and examine the changes after 1978 when China started its market-oriented reforms. To better understand the real business cycle phenomena in China, we develop several estimations to overcome the data problems and improve the business cycle measurement, in particular the consumption, investment, employment and labor hours. We find tha...

Do such episodes occur randomly, or is there a pattern to claims’ failure to predict employment fluctuations? This edition of Current Issues compares the accuracy of a simple forecasting model that incorporates initial claims with the accuracy of a forecasting model that excludes initial claims. Interestingly, we find that the reliability of claims in predicting employment fluctuations depends ...

This paper reviews the usefulness of monetary conditions in the euro area as leading indicators for aggregate demand conditions. Monetary conditions are measured with the MCI concept proposed by the Bank of Canada, and with the yield spread. A central result is that causality runs in both ways between monetary and aggregate demand conditions. The endogeneity of monetary conditions raises import...

This paper proposes a model of endogenous fluctuations in investment. A monopolistic producer has an incentive to invest when the aggregate demand is high. This causes a propagation of investment across sectors. When the investment follows an (S,s) policy, the propagation size can exhibit a significant fluctuation. We characterize the probability distribution of the propagation size, and show t...

So far the literature on DSGE models with energy price shocks uses energy on the production side only. In these models, energy shocks are responsible for only a negligible share of output fluctuations. We study the robustness of this finding. The aim of our paper is to model the response of household behavior to energy shocks in more detail as in the existing literature. Specifically, in additi...

For some 5-year-olds, delayed kindergarten enrollment may result in long-term academic benefits. Although waiting an additional year allows for further development prior to the start of formal education, the economic costs of the next best alternatives can be significant. This study examines the impact of short-term economic fluctuations on a household’s kindergarten enrollment decision. I find...

Traditionally, fluctuations in firms’ stocks have played a key role in shaping the business cycle in industrialised economies. While changes in stocks – that is, inventory investment – account for only a very small part of the level of Gross Domestic Product (GDP) they play an important part in explaining changes in the level of GDP. In Australia, over the past thirty years, quarterly changes i...