Quarterly Review 1421

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Business Cycles: Real Facts and a Monetary Myth
Finn E. Kydland
Edward C. Prescott - Senior Monetary Advisor
Spring 1990

Abstract

This paper argues that the reporting of facts in light of theory fosters the development of theory. Dynamic neoclassical macro theory guided the selection of facts to report. The hope is that these facts will foster the further development of this theory. A finding is that the price level is countercyclical in the post-Korean War period. This finding debunks the myths that the price level is procyclical, with the postwar period being no exception.

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