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Inventories and the Three Phases of the Business Cycle

Daniel E. Sichel
Journal of Business & Economic Statistics
Vol. 12, No. 3 (Jul., 1994), pp. 269-277
DOI: 10.2307/1392083
Stable URL: http://www.jstor.org/stable/1392083
Page Count: 9
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Inventories and the Three Phases of the Business Cycle
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Abstract

This article demonstrates that recessions typically are followed by high-growth recovery phases that push output back to its prerecession level. Thus postwar fluctuations in real output in the United States have consisted of three sequential phases rather than two--contractions, high-growth recoveries, and moderate-growth periods following recoveries. Data from before World War II also exhibit this pattern. For the postwar period, the three-phase pattern is shown to reflect swings in inventory investment and suggests that output fluctuations have an important transitory component. The evidence in this article supports DeLong and Summers's output-gaps view and Friedman's "plucking" model view of fluctuations.

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