Business Conditions Analysis (2) - Essay Example

Business Conditions Analysis [N a m e] Method and Data Used by the National Bureau of Economic Research (NBER) in order to Determine the Dates and Timing of the Business Cycles Peaks and TroughsNational Bureau of Economic Research (NBER) was established in the year 1920. The Business Cycle Dating Committee of the NBER, works to determine the dates and timing of the business cycles peaks and troughs and in the year 1929 presented the first ever business cycles dates (NBER). In this essay an attempt has been made to understand and analyze the method and procedure used by the Business Cycle Dating Committee for identifying the dates of the important shifts and turns in the business cycle and economy of the United States.

The Business Cycle Dating Committee gathers data about important economic indicators like real Gross Domestic Product, employment level, real income and many other. Along with this, the committee also take into consideration some of the minor economic indicators which do not reflect the overall economy like real sales. All these indicators are used in order to predict and analyze the economic activities which in turn facilitates in the process of identifying the peaks and troughs in the business cycle (NBER).

National Bureau of Economic Research (NBER) has specific definitions for the recession and expansion, according to which the Business Cycle Dating Committee of NBER take decisions about the important turning points of the overall economy of United States. Because of these limited definitions, the committee is unable to distinguish between the actual shift in the business cycle from the interruptions of short level (NBER).The combine use of indicators reflecting overall economy and indicators which do not reflect overall economy can raise the concern about the double counting different industries and figures.

However, on the other hand this method of using and considering both set of indicators facilitates the committee in the process of identifying accurate dates of the peaks and trough as some times the broad economic indicators can present conflicting results (NBER).The most common definition of recession which has been used by different financial and economic analysts is that recession is defined as the period of two successive and repeated quarters in which the overall GDP of the economy falls.

This definition is commonly known as the two quarter definition of the recession. But, National Bureau of Economic Research does not use this two quarter definition. The Business Cycle Dating Committee gives high consideration to important monthly indicators and along with this combine different set of economic indicators in order to identify important events in more efficient and effective way (NBER).Along with all other indicators, level of employment and unemployment is also used by the committee in order to identify the economic activity in the economy.

However, the committee does not indulge in early real time analysis and decisions and wait to make sure that all relevant data is available for the analysis. According to NBER, there is no concept of double dip recession in their methods and procedures. Apart from this, the Business Cycle Dating Committee does not recognize the depression separately (NBER).The NBER’s Business Cycle Dating Committee, from the start, has been making sure to perform their task effectively and efficiently. In order to obtain the estimates and forecasted figures about the real GDP every month, the committee is taking the services of professional macroeconomic advisors.

Along with this, the committee members also put in their own efforts in order to obtain and construct the estimates about the GDP and other economic indicators (NBER).Works CitedNBER. Statement of the NBER Business Cycle Dating Committee on the Determination of the Dates of Turning Points in the U.S. Economy. 28 Jan. 2010. NBER. Statement of the NBER Business Cycle Dating Procedure: Frequently Asked Questions. 28 Jan. 2010.