1 / 15

US Business Cycles

US Business Cycles. Lecture 20. US Business Cycles. What Forces Create Major Business Cycles in the United States? Following the lead of the bond market, the Federal Reserve has raised interest rates. Does this portend a US recession?

dianne
Download Presentation

US Business Cycles

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. US Business Cycles Lecture 20

  2. US Business Cycles • What Forces Create Major Business Cycles in the United States? • Following the lead of the bond market, the Federal Reserve has raised interest rates. Does this portend a US recession? • Generally, do recessions emanate from government policies or private sector decisions?

  3. The Forces Creating Macroeconomic Cycles Oil Price Shocks Are The Most Commonly Imagined: This Illustration from The Economist is Typical Real Oil Price Unemployment Rate in Percent REAL OIL PRICE UNEMPLOYMENT RATE

  4. The Forces Creating Macroeconomic Cycles Can be Totally Understood Actual vs. Explained Real GDP Growth Percent of Total

  5. Wave Makers Affecting the Circular low of Income and Production Exchange Rates Imports Additive Forces Restrictive Forces Exports Sales Taxes Government Spending Private Sector Spending GDP = U.S. Output and Income Credit & Interest Rates Income Taxes

  6. The Core Model Structural or Behavioral Model C=C0 + C1 * (GDP - T) - C2 * i I= I0 + I1 * (GDP- GDP(-1)) + I2 * I M = M0 + M1 * Y + M2 * I X = X0 + X1 * GNPW + X2 * I G=G GDP=C+I+G+X-M • Reduced Form Model • Derived from Structural Model • C=C ( G, T, i, GNPW ) • I = I ( G, T, i, GNPW ) • M = M ( G, T, i, GNPW ) • X = X ( G, T, i, GNPW ) • GNP = C+I+X-M +G • = GNP ( G, T, i, GNPW ) Substitute to eliminate all endogenous variables from left-side of each equation

  7. The Forces Creating U.S. Macroeconomic CycleSystematic Patterns, 1976 - 1998

  8. The Forces Creating Macroeconomic CyclesOil Shocks Percent of Total

  9. The Forces Creating Macroeconomic CyclesDemographic Forces Percent of Total

  10. The Forces Creating Macroeconomic CyclesFinance Factors Percent of Total

  11. The Forces Creating Macroeconomic CyclesInternational Trade Factors Percent of Total

  12. The Forces Creating Macroeconomic CyclesFederal Government Roles Percent of Total

  13. The Forces Creating Macroeconomic CyclesFederal Policy Summary Percent of Total

  14. The Forces Creating Macroeconomic Cycles • Some observers think the business cycle is dead • It’s not dead, just fitfully sleeping • The “nirvana” or “goldilocks” economy of recent years is due to: • Unusually stable federal government and Federal Reserve policies • A serendipitous balance of international forces • The private sector follows the wave-makers; it does not lead or cause the cycles • Whenever the “wave makers” once again create coincident forces, a major business cycle will re-appear

  15. The Forces Creating Macroeconomic CyclesThe Wave Makers are Either Benign or Offsetting, For Now Percent of Total

More Related