Under common ARIMA representations of income, the permanent-income hypothesis predicts that the volatility of consumption should be larger than the volatility of unanticipated shocks to income; this prediction is not supported by the data. The authors examine whether this apparent excess...

In the first half of this century, special attention was given to two features of the business cycle: the comovement of many individual economic series and the different behavior of the economy during expansions and contractions. Recent theoretical and empirical research has revived interest in...