the american business cycle continuity and change in recent decades the american economy has experienced the worst peace time inflation in its history and the highest unemployment rate since the great depression these circumstances have prompted renewed interest in the concept of business cycles which joseph schumpeter suggested are like the beat of the heart of the essence of the organism that displays them in the american business cycle some of the most prominent macroeconomics in the united states focuses on the questions to what extent are business cycles propelled by external shocks how have post 1946 cycles differed from earlier cycles and what are the major factors that contribute to business cycles they extend their investigation in some areas as far back as 1875 to afford a deeper understanding of both economic history and the most recent economic fluctuations seven papers address specific aspects of economic activity consumption investment inventory change fiscal policy monetary behavior open economy and the labor market five papers focus on aggregate economic activity in a number of cases the papers present findings that challenge widely accepted models and assumptions in addition to its substantive findings the american business cycle includes an appendix containing both the first published history of the nber business cycle dating chronology and many previously unpublished historical data series

interpreting the cyclical behavior of the price level in the u s the development of macroeconomic theory is largely guided by so called stylized facts whether truly facts or myths the existence of such widely believed empirical regularities tends to constrain the class of acceptable theories to be taken seriously a macroeconomic model must be able to explain salient stylized facts in a reasonably satisfactory way it is therefore imperative that these facts be such

when do long run identifying restrictions give reliable results many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long run effects of shocks this article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions although many aspects of these issues have been raised before this article draws out and illustrates the implications for inferences under the long run scheme furthermore it provides strategies for dealing with the problems

congested public goods the case of fire protection abstract this paper uses a fire protection measure based on a community s fire insurance rating to estimate the strength of congestion effects for fire protection services the empirical results show that the congestion properties of fire protection are much like those of a pure public good in addition the paper introduces a new notion of returns to scale for public goods and estimates the relevant parameters for the fire protection case

using the aggregate demand aggregate supply model to identify structural demand side and supply side shocks results using a bivariate var this paper uses the short run restrictions implied by a simple aggregate demand aggregate supply model as an aid in identifying structural shocks combined with the blanchard quah restriction it allows estimation of the slope of the aggregate supply curve the variances of structural demand and supply shocks and the extent to which structural demand and supply shocks are correlated this paper finds that demand and supply shocks are highly correlated and that demand shocks possibly can account for as much as 82 of the long run forecast error variance of real u s gdp

on the measurement of congestion in the provision of local public goods abstract this paper contends that a measurement problem the zoo effect has led to upwardly biased estimates of the degree to which local public goods are subject to congestion the suggestion is that the observed positive correlation between public expenditure and population size reflects in large measure the wider range of services provided in more populous jurisdictions not simply a high propensity of these goods to become congested

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

have postwar economic fluctuations been stabilized previous investigations of whether the volatility of the u s economy diminished after world war ii have been inconclusive because of questionable prewar macroeconomic aggregates we examine more broadly the hypothesis of the stabilization of the postwar economy by focusing on the duration of business cycles rather than their amplitude in the process we avoid the debate about the quality of prewar aggregates using distribution free statistics we find clear evidence of postwar duration stabilization in terms of a shift toward longer expansions and shorter contractions moreover we find no shift in whole cycle durations which suggests a reallocation of the business cycle away from contraction and toward expansion

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

interpreting permanent shocks to output when aggregate demand may not be neutral in the long run this paper studies a popular statistical model of permanent and transitory shocks to output using a set of arguably more plausible structural assumptions one way to structurally interpret the model is by assuming aggregate demand has no long run output effect however many economic theories are inconsistent with that assumption instead we reinterpret the statistical model assuming a positive shock to aggregate supply lowers the price level and in the long run raises output while a positive shock to aggregate demand raises the price level under these assumptions a puzzling finding from the empirical literature implies that a positive aggregate demand shock had a long run positive effect on output in pre world war i economies

a simple empirical measure of central banks conservatism in this paper we suggest a simple empirical and model independent measure of central banks conservatism based on the taylor curve this new indicator can easily be extended in time and space whatever the underlying monetary regime of the considered countries we demonstrate that it evolves in accordance with the monetary experiences of 32 oecd member countries from 1980 and is largely equivalent to the model based measure provided by krause mendez southern economic journal 2005 we finally bring forward the interest of such an indicator for further empirical analysis dealing with the preferences of central banks

two sector growth models with productive public goods equilibrium in determinacy author affiliation been lon chen institute of economics academia sinica 128 academia road section 2 taipei 11529 taiwan e mail bchen econ sinica edu tw corresponding author shun fa lee department of industrial economics tamkang university 151 ying chuan road tamsui taipei county 25137 taiwan e mail alphalee mail tku edu tw acknowledgment we are grateful to two anonymous referees and an editor for constructive comments and to participants in several workshops for valuable comments and suggestions in earlier versions of the paper 1 introductionmodels of economic growth with multiple equilibrium paths offer an explanation as to why we often observe diverse growth performances among countries with similar economic environments a central question is under what conditions is it possible to establish local indeterminacy in this paper we study a lucas 1988 human capital based growth model and investigate whether there are multiple equilibrium paths and thus local equilibrium indeterminacy in the neighborhood of a balanced growth path equilibrium indeterminacy in existing two sector human capital based growth models emerges based upon two mechanisms one of the mechanisms is differential factor tax rates initiated in the work of bond wang and yip 1996 and followed by that of raurich 2001 the other mechanism is sector specific externalities pioneered in the work of benhabib and farmer 1996 in an exogenous growth model and followed by the work of benhabib meng and nishimura 2000 and mino 2001 in endogenous growth models ben gad 2003 combined the two mechanisms these two mechanisms establish local indeterminacy when the mechanisms cause the factor intensities at the social perspective and those at the private perspective to reverse the purpose of this paper is twofold first we argue that once productive public goods are considered the two existing mechanisms are not robust in creating local indeterminacy then we take into account congestion in public services so a two sector model with the two existing mechanisms can generate local indeterminacy our purpose is motivated by the following in the existing models with sector specific externalities or distorted factor taxes there is either no government spending or if the government spending is taken into account only consumptive public spending and government transfers are considered recently a number of authors have documented the positive impact of public expenditure upon the productivity of private capital 1 when there is productive public spending the production technology is externally enhanced by the public goods productive public goods as an engine of economic growth have received much attention in endogenous growth models in particular a number of studies in this line of modeling strategy have obtained local indeterminacy 2 thus it is important to determine whether or not differential factor tax rates and sector specific externalities create local indeterminacy in models with productive public goods however as we will find the two existing mechanisms no longer create local indeterminacy in a two sector growth model with productive public goods unless the difference in the factor tax rates and the gap in the sector specific externalities are implausibly large intuitively productive public goods introduce the effects of intersectoral externalities they offset the effects of the two existing mechanisms that would have otherwise reversed the factor intensity at the social viewpoint from the factor intensity at the private viewpoint as a consequence the two existing mechanisms are not robust in the establishment of local indeterminacy in models with productive public goods this paper then introduces the congestion effect in the use of public goods an effect offsetting the effect from public spending to salvage the two existing mechanisms

an analysis of returns to scale in public production with an application to fire protection abstract this paper analyzes returns to scale in public production existing studies fail to differentiate among three dimensions of scale service quality the level of governmental activity and the number of people served a fourth dimension economies of scope is need for agencies that provide multiple services this paper provides a formal definition of returns to scale for each dimension this framework is applied to fire protection using a translog cost function with two services fire prevention and fire suppression the results indicate economies of scope increasing returns to quality scale and constant returns to population scale

the new deal and modern memory summary economists and other social scientists may never be able to explain fully why the greatdepression happened when it did or why it initially was so severe numerous hypotheses havebeen advanced as we have seen and each of them contributes important insights into thecauses of the macroeconomic calamity in which most of the world was mired in 1929 1933 if however one is forced to adopt a monocausal theory it must center on the actions of america scentral bank which presided over an extraordinary expansion in bank credit in the mid to late1920s and then took the punch bowl off the table for the purposes of this article though the key question is why did the great depressionlast longer in the united states than it did in any other nation the answer as laid out in thenext section is presidential politics 23 there will come seven years of great plenty throughout all the land of egypt but after them will arise seven years offamine and all the plenty will be forgotten in the land of egypt the famine will consume the land genesis 41 29 30 nkjv

identifying sources of macroeconomic and exchange rate fluctuations in the uk abstract using quarterly data for the period 1985 1 2011 1 this paper uses a stylised open economy structural var model to identify the types of shocks responsible for macroeconomic fluctuations in the uk economy the stylised model implies a set of short run restrictions that allow for the identification of the shocks the importance of each shock is determined by examining forecast error variance decompositions impulse response functions and implied long run or permanent effects the results presented here imply that two shocks called the technology and is shocks are relatively more important than other shocks monetary shocks do exhibit long run monetary neutrality but clearly monetary policy is not responsible for a meaningful share of output and employment fluctuations during the sample period the estimated var and structural disturbances imply that the model accurately reflects the uk economy there is little evidence of a price puzzle or an exchange rate puzzle evidence against uncovered interest rate parity in response to an unexpected monetary policy tightening

how well does the is lm model fit postwar u s data postwar u s time series for money interest rates prices and gnp are characterized by a multivariate process driven by four exogenous disturbances those disturbances are identified so that they can be interpreted as the four main sources of fluctuations found in the is lm phillips curve model money supply money demand is and aggregate supply shocks the dynamic properties of the estimated model are analyzed and shown to match most of the stylized predictions of the model the estimated decomposition is also used to measure the relative importance of each shock to interpret some macroeconomic episodes and to study sources of permanent shocks to nominal variables

a note on the publicness of local goods evidence from new york state municipalities for more than a decade now the non publicness of goods provided by local governments has been an accepted result in the median voter demand literature mcmillan wilson and arthur 1981 found that publicness was exhausted in ontario towns of more than 10 000 inhabitants but that there were still unexploited economies to collective provision in smaller towns using the original bergstrom and goodman 1973 model and new york state data i find that there is even less evidence of publicness in small towns than in large ones my results call into question the mcmillan wilson and arthur hypothesis une note sur le degre de materialite publique d usage des biens locaux le cas des municipalites de b etat de new york depuis plus d une decennie l un des resultats de la litterature specialisee analysant le comportement de demande du voteur median a ete que les biens fournis par les gouvernements locaux n etaient pas des biens publics mcmillan wilson et arthur 1981 ont montre que le degre de materialite publique d usage etait limite dans le cas des villes de plus de 10 000 habitants en ontario mais qu il existait des economies inexploitees emanant de la fourniture publique dans le cas des plus petites villes a partir du modele de bergstrom et goodman 1973 et de donnees pour l etat de new york l auteur en arrive a la conclusion qu il y a encore moins de materialite publique d usage dans les petites villes que dans les grandes ces resultats remettent en question l hypothese mcmillan wilson et arthur in contrast to the strict samuelsonian dichotomy of pure public and pure private goods the tiebout 1956 and buchanan 1965 models plot goods along a continuum of congestability goods provided by local governments or collectively purveyed and consumed in clubs are described as lying somewhere between the two polar cases the median voter demand model as developed by borcherding and deacon i would like to thank wallace oates william oakland suk kang and an anonymous referee for helpful comments on earlier drafts of this paper they are of course exonerated from association with such errors as may still remain canadian journal of economics revue canadienne d economique xix no 3 august aout 1986 printed in canada imprime au canada 0008 4085 86 568 573 1 50 canadian economics association this content downloaded from 157 55 39 102 on mon 03 oct 2016 05 08 06 utc all use subject to http about jstor org terms publicness of local goods 569 1972 and bergstrom and goodman 1973 incorporates this hypothesis observed levels of local public expenditures are said to reflect the preference of the median voter however the empirical models also include a congestion function intended to reflect the effect of collective consumption on individual enjoyment the function used in the literature is of the form

corrigendum to congestible public goods and local indeterminacy a two sector endogenous growth model journal of economic dynamics control 31 7 2007 2486 2518

an optimizing is lm specification for monetary policy and business cycle analysis we ask whether relations of the is lm type can sensibly be used for the aggregate demand portion of a dynamic optimizing general equilibrium model intended for analysis of issues regarding monetary policy and cyclical fluctuations the main result is that only one change the addition of a term regarding expected future income is needed to make the is function match a fully optimizing model whereas no changes are needed for the lm function this modification leads to a dynamic forward looking model of aggregate demand that is tractable and usable with a wide variety of aggregate supply specifications theoretical applications concerning price level determinacy and gradual price adjustment are included

output growth and its volatility the gold standard through the great moderation this study examines the relationship between u s output growth and its volatility over the period 1876 i to 2012 ii we adjust the data for outliers and structural breaks we employ generalized autoregressive conditional heteroskedasticity garch and exponential garch egarch specifications normality and homoskedasticity appear only in the garch or egarch model that corrects for the outliers when including the break in the mean equation high volatility persistence remains after also accommodating the breaks in the variance equation the integrated garch effect proves spurious either for the symmetric or the asymmetric model finally our empirical results suggest that the finding of higher output growth volatility stimulating output growth and higher output growth reducing its volatility obtained from the symmetric garch in mean garch m model also proves spurious as a result of the emergence of an asymmetric effect our more appropriately specified asymmetric egarch m model suggests positive volatility in mean and level effects in the long period real gross national product series

did leaving the gold standard tame the business cycle evidence from nber reference dates and real gnp most probable break point ushering in an era of longer u s expansions both absolutely and relative to subsequent recessions their analysis is based on cycle durations as defined by national bureau of economic research nber reference dates however much of macroeconomic analysis is based on i growth cycles i e periods when the economy s production is above or below trend rather than absolute increases or decreases in economic activity and ii aggregate time series volatility as the prime indicator of macroeconomic stability in light of this we reevaluate the march 1933 break point first using hp filtered quarterly gross national product gnp our analysis of growth cycle durations still implies a break point near 1933 second we test for structural breaks in the volatility of gnp growth rates and deviations from trends these tests suggest a structural break considerably later than

the publicness of local public goods evidence from ontario municipalities recent studies of local public good provision report publicness parameter estimates of about one indicating private good characteristics this empirical investigation of a wider range of communities obtains parameter estimates of significantly less than one indicating a high degree of publicness exists in smaller municipalities and within the service areas of individual public facilities comprising the supply network in larger centres it is argued that the observed values of the publicness parameters have no normative significance as to the merits of public versus private provision la materialite publique d usage des biens publics locaux resultats d une etude de municipalites ontariennes les etudes recentes sur l approvisionnement de biens publics locaux indiquent des coefficients de materialite publique d usage autour de l unite c est a dire que les biens publics locaux ont de fortes caracteristiques semblables aux biens prives ce memoire presente les resultats d un enquete empirique d un large eventail de communaut6s locales et en arrive a des valeurs pour le coefficient de materialite publique d usage qui sont bien moins que l unite et qui donc indiquent un haut degre de materialite publique d usage dans les petites municipalites mais aussi dans les zones de service d infrastructures particulieres parc bibliotheque poste de pompier etc qui forment le reseau d approvisionnement de biens publics dans les grands centres les auteurs suggerent que les valeurs observees de ces coefficients de materialite publique d usage n ont aucune portee normative et donc ne sauraient arbitrer les merites relatifs d un approvisionnement prive ou public de certains biens

business cycle durations and postwar stabilization of the u s economy average postwar expansions are twice as long as prewar expansions and contractions are one half as long this paper investigates three possible explanations the first explanation is that shocks to the economy have been smaller in the postwar period the second explanation is that the composition of output has shifted from very cyclical sectors to less cyclical sectors the third explanation is that the apparent stabilization is largely spurious and is caused by differences in the way that prewar and postwar business cycle reference dates were chosen by the national bureau of economic research the evidence presented in this paper favors this third explanation copyright 1994 by american economic association

the computational experiment an econometric tool an economic experiment consists of the act of placing people in an environment desired by the experimenter who then records the time paths of their economic behavior performing experiments that use actual people at the level of national economies is obviously not practical but constructing a model economy and computing the economic behavior of the model s people is such experiments are termed computational this essay specifies the steps in designing a computational experiment to address some well posed quantitative question the authors emphasize that the computational experiment is an econometric tool used in the task of deriving the quantitative implications of theory

on measuring congestion of local public goods abstract using data for fire protection services this brief paper provides empirical evidence in large part demonstrating the existence of the zoo effect identified by oates the zoo effect implies an upward bias in the measurement of congestion in local public good provision resulting from the lack of a range or quality of service measure the introduction of a quality measure is found to reduce estimates of the degree of congestion in fire protection services

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

does detrending matter for the determination of the reference cycle and the selection of turning points we examine the sensitivity of turning points classification to detrending and compare the implied cycles to those derived by nber or doc researchers two dating rules are considered turning point dates are broadly insensitive to detrending with one dating rule but not the other and many procedures generate false alarms and miss several common turning points with the latter one amplitude and duration properties are also sensitive detrending and dating rules the hodrick and prescott and a frequency domain filters are best in mimicing nber and doc cycles regardless of the dating rule used