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Growth-Cycle Nexus

Discussion Papers

No.387

by KODAMA Masahiro
February 2013

ABSTRACT

This research sheds light on the negative correlation between economic growth and business cycle in less developed economies. Whereas many previous studies explain the negative correlation from a viewpoint in which business cycle affects economic growth, we attempt to present a hypothesis based on the other influence direction in which economic growth affects business cycle. We investigate the validity of the hypothesis using two methods: econometric analysis and numerical analysis. We find that the econometric analysis supports our hypothesis. The numerical analysis shows that the effect of the proposed hypothesis produces the negative correlation between economic growth and business cycle.



Keywords: Growth; Business Cycle; Less Developed Economies
JEL classification: E32, O40

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