Real Business Cycles

Chapter 20Business Cycles: Real Facts and a Monetary Myth^*

Federal Reserve Bank of Minneapolis Quarterly Review 14(2), Spring 1990, pp. 3–18

Finn E. KydlandProfessor of EconomicsGraduate School of Industrial AdministrationCarnegie—Mellon University

Edward C. PrescottAdviserResearch DepartmentFederal Reserve Bank of Minneapolisand Professor of EconomicsUniversity of Minnesota

Ever since Koopmans (1947) criticized Burns and Mitchell’s (1946) book on Measuring Business Cycles as being “measurement without theory,” the reporting of business cycle facts has been taboo in economics. In his essay, Koopmans presents two basic criticisms of Burns and Mitchell’s study. The first is that it provides no systematic discussion of the theoretical reasons for ...