ECRI Insights
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Over three generations of business cycle research, we have helped to advance the understanding of business cycle dynamics, some of which we have shared publicly.
The excerpts and papers collected here reflect a sampling of important concepts pioneered by our research group.
Ideas
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What the Fed Has Forgotten: The Inflation Cycle Is Not the Business Cycle
July 2019 | by ECRIThe Fed has been confounded by its inability to get inflation to rise, having lost its institutional memory about inflation cycles, which are distinct from business cycles. This has undermined its credibility, with promises of monetary policy tightening running into cyclical downturns in growth and inflation. This would not be the case if it looked to leading indicators of the inflation cycle for forward guidance, as it once did.
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The Danger of Mixing Up Cyclical Changes with Structural Shifts
February 2018 | by ECRINotwithstanding a cyclical upturn in global growth, the long-term structural decline in advanced-economy trend growth is not over, despite wishful thinking to the contrary. But when that mistaken belief drives an international shift from quantitative easing to quantitative tightening, monetary policy goes on a collision course with the economic cycle.
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How Reliable Are GDP Consensus Forecasts?
February 2017 | by ECRIDespite the attention garnered by consensus forecasts of both the long-term and nowcast varieties, they consistently fail to anticipate turning points in the economy. Leading indexes like the ECRI's U.S. Long Leading Index, on the other hand, are specifically designed to anticipate cyclical turning points, and lead them fairly consistently.
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Grand Experiments That Are Too Big to Fail
January 2016 | by ECRIBy clinging to unrealistic growth expectations, the economic establishment has effectively bet everything on the success of these grand experiments, and the risk of losing that bet is rising inexorably. Ultimately, only policies that genuinely address the challenges of demographics and productivity have a chance to succeed. It is high time for that discussion to begin.
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The Yo-Yo Years
March 2012 | by ECRIThe convergence of two cyclical patterns virtually dictates an era of more frequent recessions in developed economies. As a result, and because of the Bullwhip Effect, growth in developing economies is going to be jerked around more than people think, making for a good deal of cyclical economic contagion. In other words, we are now in the yo-yo years.
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More Frequent Recessions
March 2010 | by ECRIThe convergence of lower trend growth and higher cyclical volatility will lead to more frequent recessions, keeping the jobless rate cycling around high levels and spelling the death of buy-and-hold strategies for stocks.
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When to Put Your Money Under Your Mattress
October 2009 | by ECRISelling (buying) stocks before recessions (recoveries) based on ECRI's real-time calls would have doubled the returns from a buy-and-hold strategy, beating the S&P by more than eight percentage points a year over the past decade.
Papers
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Cyclical Misconceptions Driving Policy Errors: Keys to the Productivity Puzzle
June 2016 | by ECRIPolicies rooted in overly optimistic assumptions about trend growth and mistaken notions about business cycle dynamics are key to the "productivity puzzle."
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The "Subpar" Recovery: a Longstanding Misunderstanding
January 2015 | by ECRIThere is a near-universal consensus that the U.S. has experienced a "subpar" recovery from the Great Recession. But the pace of that revival has been fairly consistent with historical patterns. In other words, nothing more by way of growth is owed to us by the business cycle.
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The Yo-Yo Years: More Recessions in the West and Volatility for the Rest
July 2012 | by ECRIThe convergence of two cyclical patterns virtually dictates an era of more frequent recessions in developed economies. As a result, and because of the Bullwhip Effect, growth in developing economies is likely to be jerked around more many realize, making for a good deal of cyclical economic contagion. In other words, we are now in the yo-yo years.
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How Well Does the Yield Curve Predict Recessions? An International Comparison
June 2011 | by ECRIThe yield spread's popularity is due to its "success" in predicting U.S. recessions. Based on ECRI's international recession dates, we find it to be an unreliable predictor of international recessions - especially with rates at zero.
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The Resurrection of Risk
November 2001 | by ECRIBy the turn of the century, many were proclaiming the death of the business cycle. But risk has returned. Because technology and globalization can both reduce and increase risk, both economies and markets will stay volatile.
ECRI History
Testimonial
In March [2009], the month the market scraped bottom, ECRI went forth with [a] tablepounding historical observation-. The implication could not have been clearer that a market rally, when it started, would be no sucker's affair but the real McCoy.
I find that ECRI's historical knowledge of economic cycles and data is almost as important to me as your indicators of future cycles.
As an investment strategist, I need to navigate the many twists and turns in the emerging economic landscape with as much foresight as possible to know when to take or avoid risk. In this quest, ECRI's array of leading indices, specifically designed to predict and navigate economic turning points, have been an indispensible tool.
For ourselves, in this cycle, we'll line up with ECRI.
Inflation Ahoy! We're indebted to the ECRI, that unnapping watchdog of inflation, for the FIG data.
Your work stands alone in the industry. I wholeheartedly value and endorse your service!
