Business cycle models are developed and tested

The gap

Evidence profile

Sourced from the synthesized of the source papers, classified as general, drawn from work published between 1993 and 2026, spanning 6 journals. Those papers have been cited 908 times in total.

Supporting evidence — 6 representative gaps

• Modeling and stability analysis of the IS-LM business cycle under the effect of the financial risks (2026) · Decisions in Economics and Finance · doi

  No study in this set empirically validates business cycle models incorporating financial risks against real stock market data. One study develops an IS-LM model with financial risks using only simulated parameter values; prior studies examine stock market–business cycle relationships empirically but do not incorporate financial risk dynamics into their analysis. Bridging this gap requires applying financial-risk-augmented models to actual equity market fluctuations.

  generalsynthesizedevidence 5/5
  Keywords: study set empirically validates business cycle models incorporating
• Financial Cycles – The Synchronization With Financial Crises (2014) · Management intercultural

  Across this set, the relationship between financial cycles and stock market performance is discussed descriptively but never modeled jointly with business cycle dynamics in a framework that predicts equity returns. One study notes that 'peaks in the financial cycle are closely associated with systemic banking crises' and that 'multidimensional interactions between financial and economic cycles' require monitoring, yet no paper operationalizes this interaction to forecast stock market behavior during different business cycle phases.

  generalsynthesizedevidence 5/5
  Keywords: across set relationship between financial cycles stock market
• Financial Market Imperfections and Business Cycles (1993) · The Quarterly Journal of Economics · cited 498× · doi

  Financial market imperfections are theoretically linked to business cycle amplification, but none of these studies measure how specific imperfections (asymmetric information, equity market breakdowns) affect stock market volatility or equity risk premiums across business cycle phases. One study establishes that imperfections cause 'sensitivity of the economy to small perturbations' but does not quantify their impact on equity valuations or returns.

  generalsynthesizedevidence 5/5
  Keywords: financial market imperfections theoretically linked business cycle amplification
• A Simple Model to Teach Business Cycle Macroeconomics for Emerging Market and Developing Economies (2015) · The Journal of Economic Education · cited 3× · doi

  Business cycle models are developed and tested for advanced economies [2, 7, 11] and separately for emerging markets [8, 10], but no study in this set examines whether stock market–business cycle relationships differ systematically between these economy types or whether financial-risk dynamics operate differently in emerging versus developed equity markets.

  generalsynthesizedevidence 5/5
  Keywords: business cycle models developed tested advanced economies separately
• Facts and Challenges from the Great Recession for Forecasting and Macroeconomic Modeling (2013) · Journal of Economic Literature · cited 152× · doi

  One study documents that recessions with financial market origins differ from supply or monetary shocks but does not specify how stock market predictors or valuation models should be adjusted for financially-driven cycles. The paper notes that 'economic models and predictors that work well at some times do poorly at other times' yet provides no framework for adapting equity forecasting models to financial-origin recessions.

  generalsynthesizedevidence 5/5
  Keywords: one study documents recessions financial market origins differ
• Measuring Business Cycles: A Modern Perspective (1996) · The Review of Economics and Statistics · cited 255× · doi

  None of these studies extends business cycle analysis to include regime-switching or nonlinear dynamics in stock market returns conditional on financial risk levels. One study mentions 'nonlinear regime-switching models' as an empirical contribution to business cycle measurement, and another study finds chaotic behavior under high financial risk, yet no paper applies regime-switching methods to model stock returns across different financial-risk regimes within the business cycle.

  generalsynthesizedevidence 5/5
  Keywords: none studies extends business cycle analysis include regime-switching

Questions about this gap