RECESSIONS AND RECOVERIES IN REAL BUSINESS-CYCLE MODELS

We evaluate the ability of a simple real business cycle model to gener ate business cycles in the classical NBER sense of the term, where rec essions are periods of absolute declines in economic activity. We use the ''phase'' classification of Burns and Mitchell [1946] to determine the ''shape'' of the business cycle and to look for asymmetries betwe en expansions and contractions. We show that such a model can generate business cycles of plausible duration and depth, but cannot match the actual ''shape'' of the business cycle. Nonlinear models, such as Fri edman's [1993] ''plucking'' model may move closely match the observed shape.