Are There Classical Business Cycles?

Abstract

The aim of this paper is to test formally the classical business cycle hypothesis, using data from industrialized countries for the time period since 1960. The hypoth- esis is characterized by the view that the cyclical structure in GDP is concentrated in the investment series: mixed investment has typically a long cycle, while the cycle in inventory investment is shorter. To check the robustness of our results, we sub- ject the data for 15 OECD countries to a variety of detrending techniques. While the hypothesis is not conrmed uniformly for all countries, there is a considerably high number for which the data display the predicted pattern. None of the coun- tries shows a pattern which can be interpreted as a clear rejection of the classical hypothesis.