ABSTRACT
Business cycles are the recurring expansion and contraction of overall economic activity associated with changes in employment, income, prices, sales and profits. Business cycles occur predominantly in market economics, and they are especially prevalent in industrialized countries with highly developed business and financial infrastructures. Since the early 1980s, the U. S. economy has become less cyclical, with fewer recessions. The length of the expansions between recessions determines the frequency of recessions. Some financial firms, in advising their clients on investments in the stock market and the bond market, may have forecasted recessions in letters to their clients. In a unique approach aimed at making specific forecasts of recessions, James Stock and Mark Watson developed an experimental model in the late 1980s based on the leading indicator approach. It is also possible that, at times, the staffs and/or the members of the Federal Reserve and the Council of Economic Advisers forecasted a recession.
