Skip to content

Research at St Andrews

Correlations between macroeconomic cycles in the US and UK: what can a frequency domain analysis tell us?

Research output: Contribution to journalArticle

Author(s)

Patrick M. Crowley, Andrew Hughes Hallett

School/Research organisations

Abstract

In this paper, the relationship between the growth of GDP and real GDP components is explored in the frequency domain using both static and dynamic techniques derived from wavelet analysis. This analysis is carried out separately for the US and the UK using quarterly data, and the results are found to be quite different for both countries. One of the major findings of the paper is that there are significant relationships between cycles of the GDP components at frequencies other than the business cycle frequencies that confirm some of the predictions of economic theory; but importantly contradict others. Secondly, that the relative power of the different cycles varies over time leading to the idea of ``volatility transfers'' between cycles. Third that the correlations and lead-lag relationships between cycles shift over time, leading to several new insights into how the aggregate demand in these two economies has actually evolved in practice. These results are of particular significance for understanding the current weak economic recovery and for why real business cycle models do not find the right relationships between GDP components.
Close

Details

Original languageEnglish
Pages (from-to)5-29
Number of pages25
JournalItalian Economic Journal
Volume2
Issue number1
Early online date14 Sep 2015
DOIs
Publication statusPublished - Mar 2016

    Research areas

  • Business cycles, Growth cycles, Discrete wavelet analysis, Time-frequency domain, US output components

Discover related content
Find related publications, people, projects and more using interactive charts.

View graph of relations

Related by author

  1. Stabilization and commitment: forward guidance in economies with rational expectations

    Hughes Hallett, A. & Acocella, N., Jan 2018, In : Macroeconomic Dynamics. 22, 1, p. 122-134 13 p.

    Research output: Contribution to journalArticle

  2. Growth-maximizing public debt under changing demographics

    Bokan, N., Hallett, A. H. & Hougaard Jensen, S. E., Sep 2016, In : Macroeconomic Dynamics. 20, 6, p. 1640-1651 12 p.

    Research output: Contribution to journalArticle

  3. The fiscal framework in a currency union: lessons from a comparison between the euro area and the Eastern Caribbean Currency Union

    Hughes Hallett, A. & Jensen, S. E. H., Jun 2016, In : World Economy. 39, 6, p. 803-823 21 p.

    Research output: Contribution to journalArticle

  4. Fiscal multipliers in downturns and the effects of Euro Area consolidation

    Gechert, S., Hallett, A. H. & Rannenberg, A., 2016, In : Applied Economics Letters. 23, 16, p. 1138-1140 3 p.

    Research output: Contribution to journalArticle

  5. Three different approaches to transparency in monetary policy

    Demertzis, M. & Hughes Hallett, A., Dec 2015, In : Economia Politica. 32, 3, p. 277-300 24 p.

    Research output: Contribution to journalArticle

ID: 242995216