Are U.S. and Seventh District business cycles alike?
When academic economists talk about business cycles, they have something more general in mind (GDP) about its trend, which is the definition typically used by business economists. For an academic economist, the business cycle describes the way that cyclical fluctuations of GDP typically relate to cyclical fluctuations of other economic time series (such as consumption and investment) from the same economy. One of the most striking findings of the vast academic business cycle literature is that irrespective of the time period or particular country, business cycles are all alike. This means that the typical relationship between cyclical fluctuations of GDP and cyclical fluctuations of other economic time series of the U.S. economy is similar to the typical relationship between cyclical fluctuations of the same time series in all other market-based economies. As Lucas (1977) notes, this finding is both important and challenging for the study of business cycles, since it suggests the possibility of a unified explanation of business cycles based on general laws governing market economies.