The Brevity and Violence of Contractions and Expansions
By A. McKay, Ricardo Reis. 2008
127 citations recorded by the source corpus.
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 - labor hoarding, a choice of when to scrap old technologies, and job training or job search - can account for the business cycle fact.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/562dd6019c50c1df7544a14681075666bc3c118e
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- Andrea Roventini
- Mauro Napoletano
- Giorgio Fagiolo
- Mirko Abbritti
- S. Fahr
- Giovanni Dosi
- Francesco Lamperti
- Alessandro Sapio
Citations in the corpus
- Downward wage rigidity and business cycle asymmetries (2013, background): “The paper most closely related to ours is McKay and Reis (2008), subsequently referred to as MR08.”
- Are output growth-rate distributions fat-tailed? some evidence from OECD countries (2008, result): “This implies that positive and negative large growth events have almost the same likelihood, thus confirming recent results on symmetry of the magnitude of GDP fluctuations (McKay and Reis, 2006).”