Measuring Business Cycles by Saving for a Rainy Day / Mario J. Crucini, Mototsugu Shintani.

Format:

Book

Author/Creator:

Crucini, Mario J.

Contributor:

National Bureau of Economic Research.

Shintani, Mototsugu.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16075.

NBER working paper series no. w16075

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

We propose a simple saving-based measure of the cyclical component in GDP. The measure is motivated by the prediction that the represenative consumer changes savings in response to temporary deviations of income from its stochastic trend, while satisfying a present-value budget constraint. To evaluate our procedure, we employ the bivariate error correction model of Cochrane (1994) to the member countries of the G-7 and Australia. Our estimates reveal, that to a close approximation, the stochastic trend component of GDP is consumption and the transitory component is the error correction term, which justifies the use of our saving-based measure.

Notes:

Print version record

June 2010.