Research Discussion Papers, Bank of Finland
No 6/2010:
Long cycles in growth: explorations using new frequency domain techniques with US data
Patrick M Crowley ()
Abstract: In his celebrated 1966 Econometrica article, Granger first
hypothesized that there is a ‘typical’ spectral shape for an economic
variable. This ‘typical’ shape implies decreasing levels of energy as
frequency increases, which in turn implies an extremely long cycle in
economic fluctuations and particulary in growth. Spectral analysis is
however based on certain assumptions particulary in that render these basic
frequency domain techniques inappropriate for analysing non-stationary
economic data. In this paper three recent frequency domain methods for
extracting cycles from non-stationary data are used with US real GNP data
to analyse fluctuations in economic growth. The findings, among others, are
that these more recent frequency domain techniques do not provide evidence
to support the ‘typical’ spectral shape and nor an extremely long growth
cycle á la Granger.
Keywords: business cycles; growth cycles; frequency domain; spectral analysis; long cycles; Granger; wavelet analysis; Hilbert-Huang Transform (HHT); empirical mode decomposition (EMD); non-stationarity; (follow links to similar papers)
JEL-Codes: C13; C14; O47; (follow links to similar papers)
49 pages, February 21, 2010
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