Variable Trends in Economic Time Series

Abstract

Abstract The two most striking historical features of aggregate output are its sustained long run growth and its recurrent fluctuations around this growth path. Real per capita GNP, consumption and investment in the United States during the postwar era are plotted in Figure 1. Both growth and deviations from the growth trend-often referred to as ‘business cycles’-are apparent in each series. Over horizons of a few years, these shorter cyclical swings can be. pronounced; for example, the 1953, 1957, and 1974 recessions are .evident as substantial temporary declines in aggregate activity. These cyclical fluctuations are, however, dwarfed in magnitude by the secular expansion of output. But just as there are cyclical swings in output, so too are there variations in the growth trend: growth in GNP in the 1960s was much stronger than it was in the 1950s. Thus, changes in long-run patterns of growth are an important feature of postwar aggregate economic activity.

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