Chapter-8 the Cyclicality of macroeconomic variables

What does it mean for a variable to be procyclical?

This means a variable changes in the same direction as another (usually output).

What does it mean for a variable to be countercyclical?

This means a variable changes in the opposite direction as another (usually output).

What does it mean for a variable to be acyclical?

This means a variable changes with no clear pattern.

What is the cyclicality of money with output?

Money is procyclical and leading.

What is the cyclicality of stock prices with output?

Stock prices are procyclical and leading.

What is the cyclicality of inflation and nominal interest rates?

They are procyclical and lagging ; inflation was argued to only be countercyclical recently by Kydland and Prescott because of economic shocks that have cause prices to rise with output falling

What is the cyclicality of real interest rates?

They are acyclical

What is the cyclicality of employment with to output?

Employment is procyclical and leading

What is the cyclicality of unemployment with to output?

Unemployment is countercyclical

What is the cyclicality of investment to output?

Investment is procyclical and leading.

What is the cyclicality of consumption expenditure?

Procyclical with respect to output.

What is the cyclicality of real wages with output?

The real wage is procyclical with respect to output.

What is the cyclicality of average labor productivity?

Average labor productivity is procyclical with respect to output. However, this is only because of the supply side shocks because otherwise change in Y over change in N is acyclical.

What is the cyclicality of Industrial production with output (Production variable)?

Industrial production is procyclical and coincidental because durable goods industries are more volatile than nondurable goods and services.

What is the cyclicality of consumption with output (expenditure variable)?

Consumption is procyclical and coincident.

What is the cyclicality of business fixed investment with output (expenditure variable) ?

Business fixed investment is procyclical and coincident.

What is the cyclicality of residential investment (expenditure variable)?

Residential investment is procyclical and leading

What is the cyclicality of inventory investment (expenditure variable)?

Inventory investment is procyclical and leading

What is the cyclicality of government purchases (expenditure variable)?

Government purchases are procyclical

Why is investment leading over consumption?

Investment is more volatile than consumption.

What is the cyclicality of employment (Labor Market Variable)?

Employment is procyclical and coincident.

What is the cyclicality of unemployment(Labor market variable)?

Unemployment is countercyclical and unclassified.

What is the cyclicality of average labor productivity(Labor market variable)?

Average labor productivity is procyclical and leading

What is the cyclicality of the real wage(labor market variable)?

The real wage is procyclical

What is the cyclicality of money supply (Money supply and inflation)?

Money supply is procyclical and leading.

What is the cyclicality of inflation (Money supply and inflation)?

Inflation is procyclical and lagging

What is the cyclicality of stock prices (Financial variables)?

Stock prices are procyclical and leading.

What is the cyclicality of nominal interest rates (Financial variables)?

Nominal interest rates are procyclical and lagging

What is the cyclicality of real interest rates (Financial variables)?

Real interest rates are acyclical (they don’t follow changes in output).