We consider a model-averaged forecast-based estimate of the output gap to measure economic slack in ten industrialized economies. Our measure takes changes in the long-run growth rate into account and, by addressing model uncertainty using equal weights on different forecast-based estimates, is robust to different assumptions about the underlying structure of the economy. For all ten countries in the sample, we find that the estimated output gap has much larger negative movements during recessions than positive movements in expansions, suggesting business cycle asymmetry is an intrinsic characteristic of industrialized economies. Furthermore, the estimated output gap is always strongly negatively correlated with future output growth and unemployment and positively correlated with capacity utilization. It also implies a convex Phillips Curve in many cases. The model-averaged output gap is reliable in real time in the sense of being subject to relatively small revisions.

This book highlights the importance of studying similarity of business cycles across countries and answers the theoretical question about the behaviour of fluctuations in economic activity over different phases of business cycles. This is done by analysing cross-country data that provides sufficient empirical justifications on the behaviour of economic activity to conclude that business cycles are alike. Further, the book maintains, from the recent empirical research, that business cycles fluctuations are asymmetric. For empirical validation of the hypothesis that business cycles are asymmetric at least in the group of seven highly developed industrialised (G7) countries, real GDP growth rates from these countries are analysed using non-linear time series and switching time series models as well as in-sample and jack-knife out-of-sample forecasts from neural networks. While importance and application of non-linear and switching time series models are employed for testing possible existence of business cycle asymmetries in all the series after taking into account long memory, conditional heteroskedasticity, and time varying volatility in the series, usefulness of non-parametric techniques such as artificial neural networks forecasts are discussed and empirically tested to conclude that forecasts from neural networks are superior to the selected time series models. Additionally, the book presents a robust evidence of business cycle asymmetries in G7 countries, which is indeed, the answer to the basic research question on the behaviour of economic fluctuation over the business cycles. The book compares spill over and contagion effects due to business cycle fluctuations within the countries studied. In addition, having known the type of business cycle asymmetries, policy makers, empirical researchers, and forecasters would be able to employ appropriate forecasting models for forecasting impact of monetary policy or any other shock on the economies of these countries.

The ups and downs of booms and slumps, often referred to as business cycles, are features of all modern economies. This book considers business cycles over three epochs 1870-1913, 1919-1938 and the post-World War II period. It provides an analysis of the key macroeconomic questions relating to economic fluctuations. Why are the ups and down more volatile in some epochs than others? Why are some business cycle shocks more persistent in their effects? Is there an international business cycle? Can present business cycle features predict future patterns? What impact will institutional changes, such as EMU have on future fluctuations?

This volume presents the most complete collection available of the work of Victor Zarnowitz, a leader in the study of business cycles, growth, inflation, and forecasting.. With characteristic insight, Zarnowitz examines theories of the business cycle, including Keynesian and monetary theories and more recent rational expectation and real business cycle theories. He also measures trends and cycles in economic activity; evaluates the performance of leading indicators and their composite measures; surveys forecasting tools and performance of business and academic economists; discusses historical changes in the nature and sources of business cycles; and analyzes how successfully forecasting firms and economists predict such key economic variables as interest rates and inflation.

This paper analyzes the evolution of the degree of global cyclical interdependence over the period 1960-2005. We categorize the 106 countries in our sample into three groups-industrial countries, emerging markets, and other developing economies. Using a dynamic factor model, we then decompose macroeconomic fluctuations in key macroeconomic aggregates-output, consumption, and investment-into different factors. These are: (i) a global factor, which picks up fluctuations that are common across all variables and countries; (ii) three group-specific factors, which capture fluctuations that are common to all variables and all countries within each group of countries; (iii) country factors, which are common across all aggregates in a given country; and (iv) idiosyncratic factors specific to each time series. Our main result is that, during the period of globalization (1985-2005), there has been some convergence of business cycle fluctuations among the group of industrial economies and among the group of emerging market economies. Surprisingly, there has been a concomitant decline in the relative importance of the global factor. In other words, there is evidence of business cycle convergence within each of these two groups of countries but divergence (or decoupling) between them.

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.