Page - 63 - in The Austrian Business Cycle in the European Context

63 by a recession ending with the next trough. which completes the cycle. The nomenclature is somewhat different in the deviation cycle approach. The local peaks of the business cycle component - as shown in the lower part of Figure 4 - are often referred to as highs and the lower turning points are called lows. Phases be- tween them are called expansions or contractions. Having this sequential pattern of the business cycle in mind, dating the turning points has to fulfil several conditions. Firstly, every dat- ing procedure - arbitrary or mechanical - has to ensure that turn- ing points alternate. It must not occur that the turning point follow- ing a peak is again a peak. Secondly, the period between the turning points should not be too short in order to allow some eco- nomically meaningful process of recovery or contraction. Further- more. turning points should represent some local minima or maxima according to certain criteria. Several methods have been developed to this end. but only the most important shall be ex- plained heres1. 6.1 The expert approaches To this class belong all approaches which are mainly based on more or less subjective evaluations. rather than on a mechanical method. The most prominent approach in this area is the dating schedule set up by the NBER. Here, a Business Cycle Dating Com- mittee publishes officially the turning points calendar for the US economy. According to the NBER. a recession is characterised by "a significant decline in economic activity spread across the economy. lasting more than a few months, normally visible in real GDP. real income. employment. industrial production. and whole- sale-retail sales88.'' This gives insight into the database that forms 87 Examples for alternative methods not reported here are proposed by Diebold - Rudebush ( 1987), Wecker ( 1979), Hess - Iwata ( 1997) or Neftci ( 1982). 88 See The Business Cycle Dating Committee (2003).