Business Cycles: Theory, History, Indicators, and Forecasting.

• Author: Chowdhury, Abdur R.

Over the past two centuries, business cycles have varied greatly in length, spread, and size. At the same time, they are distinguished by their recurrence, persistence, and pervasiveness. In recent years questions about the changing nature of business cycles have increasingly become a focus of academic interest and public concern. Victor Zarnowitz has long been considered a leading figure in the study of business cycles. The collection of papers in this book represent a carefully integrated and up-to-date study of business cycles, reexamining some of his earlier research as well as addressing recent developments in this area.

During the last few decades, the NBER has sponsored a great deal of important research on business cycle fluctuations. This book, published by the NBER, includes findings that have been reported in many published research papers and conference volumes. A nice introduction by the author summarizes and serves as a road map for readers. Thereafter the papers are organized around four general themes--theory, history, indicators, and forecasting. The book first delineates what we know and still do not know about business cycles. These facts are then assessed in light of the theoretical literature on fluctuations in economic activity. The book consists of eighteen chapters divided into four sections. Two of the chapters are joint products of work with other co-authors. Most of these chapters, whether addressing problems of theory, evidence, indicators, or prediction, are rather comprehensive in scope. This, in my view, reflects a gradual expansion of the author's research interests from particular cyclical processes, events, and hypotheses to the long history and modern evolution of business cycles.

In the first section, Zarnowitz reviews various business cycle theories including the Keynesian and monetary theories, rational expectations and real business cycle theories. In doing so, he investigates how business cycles have evolved over time in response to changes in the size of the government, nature of stabilization policies, and the degree of openness of an economy. In the next section, Zarnowitz discusses various measures of the trends and cycles in economic activity, such as, output, prices, inventories, residential and non-residential investments, and other economic variables. He examines the length and severity of U.S. business cycles since the early nineteenth century and evaluates the success of macro models in...