The “business cycle” is a fundamental yet elusive concept in macroeconomics. My research involves empirical analysis of the business cycle as transitory deviations in economic activity away from a permanent, or trend, level. I find that these transitory movements are more like recurring negative shocks which periodically pull the economy below trend rather than persistent and symmetric fluctuations around trend. Although contrary to the modern consensus in economics, this finding confirms some earlier conceptions of the business cycle and has important implications for the conduct of macroeconomic policy. I will discuss how the modern consensus emerged, what the evidence is for the alternative view, and why it is so important for policy.
James Morley is Associate Dean (Research) and Professor of Economics in the UNSW Business School. Before moving to Australia in 2010, he was a faculty member at Washington University in St. Louis (1999-2010) and Research Fellow at the Federal Reserve Bank of St. Louis (2004-2010). He has also held many visiting positions, including at the Bank of Canada, the Reserve Bank of New Zealand, and the Bank of International Settlements. His research has been published in many top academic journals and focuses on the empirical analysis of business cycles, stabilization policy, and sources of persistent changes in macroeconomic and financial variables. Professor Morley’s research focuses on time-series applications in macroeconomics, finance, and international finance. He has written on topics such as trend/cycle decomposition for macroeconomic data, the long-run consequences of recessions, stock market volatility and return predictability, and the adjustment of exchange rates to purchasing power parity. His articles have appeared in top journals, including the Journal of Econometrics, Journal of International Economics, Journal of Monetary Economics, and Review of Economics and Statistics.