Identifying Business Cycle Turning Point Real Time - strongEconomicstrong.pdfVIP

Identifying Business Cycle Turning Points in Real Time Marcelle Chauvet and Jeremy M. Piger common feature of industrialized economies nations that organize their work mainly in Ais that economic activity moves between business enterprises: a cycle consists of periods of expansion, in which there is expansions occurring at about the same broad economic growth, and periods of recession, time in many economic activities, followed in which there is broad economic contraction. by similarly general recessions, contractions Understanding these phases, collectively called the and revivals which merge into the expansion business cycle, has been the focus of much macro- phase of the next cycle. economic research over the past century. In the A fundamental element of this definition is the United States, the National Bureau of Economic Research (NBER), a private, nonprofit research idea that business cycles can be divided into distinct organization, serves a very useful role in cataloging phases, with the phase shifts characterized by stylized facts about business cycles and providing changes in the dynamics of the economy. In particu- a historical accounting of the dates at which regime lar, expansion phases are periods when economic shifts occur. This task began soon after the found- activity tends to trend up, whereas recession phases ing of the NBER in 1920 and has continued to the are periods when economic activity tends to trend present day.1 Since 1980, the specific task of dating down. In practice, to date the transition from an “turning points” in U.S. busines