Calling the Business Cycle

This book analyzes the interaction between the business cycle and tax policy. The first chapter looks at the history of tax policy and relates it to business cycle dates of the NBER. It is found that pronouncements that we have entered a recession often stimulate new tax bills. This identifies a problem however. Announcement often come many months after the start of a recession. The second chapter explores whether we can improve countercyclical policy by using GDP data to identify in real time whether we have entered a recession. The section reveals that crucial months could be saved if a simple model were used to relate the latest change in GDP to the probability of recession. The third chapter explores whether models that use monthly data could improve on the results obtained in Chapter 2. Again, a significant improvement is documented in the ability to use statistical models to call recessions. The final chapter makes policy recommendations given the results in the fiHassett, Kevin A. is the author of 'Calling the Business Cycle' with ISBN 9780844742052 and ISBN 0844742058.