Technology, Investment, and Economic Fluctuations

Since 1854, the United States has experienced 32 business cycles. While the average length of these cycles (trough-to-trough) has been 51 months, there has been significant variation across different subperiods. This paper attempts to explore the relationship between capital accumulation, technology accumulation, and the business cycle.

Performance Evaluation of the New Connecticut Leading Employment Index Using Lead Profiles and BVAR Models

Dua and Miller (1996) created leading and coincident employment indexes for the state of Connecticut, following Moore's (1981) work at the national level. The performance of the Dua-Miller indexes following the recession of the early 1990s fell short of expectations. This paper performs two tasks. First, it describes the process of revising the Connecticut Coincident and Leading Employment Indexes. Second, it analyzes the statistical properties and performance of the new indexes by comparing the lead profiles of the new and old indexes as well as their out-of-sample forecasting performance, using the Bayesian Vector Autoregressive (BVAR) method. The new indexes show improved performance in dating employment cycle chronologies. The lead profile test demonstrates that superiority in a rigorous, non-parametric statistic fashion. The mixed evidence on the BVAR forecasting experiments illustrates the truth in the Granger and Newbold (1986) caution that leading indexes properly predict cycle turning points and do not necessarily provide accurate forecasts except at turning points, a view that our results support.