Is the Economic Cycle Still Alive? Theory, Evidence and Policies.
In an elaborately illustrated essay, Stefano Fachin and co-authors present a decomposition of permanent and transitory components of output variability in four European countries, as it is impacted by supply, technology and demand shocks. Their choice of methodology is explained in a useful and well-organized comparative evaluation recent similar efforts.
Cyclical indicators are given extensive treatment, starting with a comprehensive review by Paolo Annunziato of the historical development and present status of indicators, with due regard to views on their purposes and usefulness. Ronny Nilsson tackles the problem of applying the OECD indicator system to central and eastern European countries, after a concise presentation of the OECD system, and two essays by Enrico Giovannini and Pietro Gennari respectively deal with short-run forecasting particularly for the Italian economy.
A short concluding essay on "The Death and Rebirth of the Business Cycle" by Innocenzo Cipolletta reviews the history of and various attitudes toward the idea of a business cycle. He reiterates a theme found in other of these essays, concluding that "... the business cycle is still with us, but should be seen as the deviation of a random walk trend due to continuous shocks of a stochastic nature" [p. 288] and that "... it is unarguable that cyclical fluctuations have lost that 'irregular regularity' so dear to Schumpeter and those who studied the business cycle as an independent phenomenon and not merely as an economies capacity to fluctuate" [p. 293].
All told, this is a reader-friendly collection that can be read profitably by those who have not followed developments in business cycle theory closely. The Essays on sources of fluctuation in the Italian economy and the multi-country analysis of the permanent component of output by Stefano Fachin, et al. will be of most interest to the specialist. This book's mathematics is neither demanding or essential. That is not to declare it the reading of choice for those wishing an update on recent work on economic fluctuations. Barro  or - more briefly - a recent "Symposium on Keynesian Economics Today"  might be preferred.
Guy Black The George Washington University, Emeritus
1. Barro, Robert J., ed. Modern Business Cycle Theory. Cambridge, Mass.: Harvard University Press, 1989.
2. Mankiw, N. Gregory, et al., "Symposium on Keynesian Economics Today." The Journal of Economic Perspectives, Winter 1993, 3-82.
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|Publication:||Southern Economic Journal|
|Article Type:||Book Review|
|Date:||Jul 1, 1995|
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