finition of business cycles formulated at the NBER, slightly revised by himself and Arthur Burns in later work at the NBER, however, that remains as the essential definition of business cycles. Business cycles are defined as a type of fluctuation found in the aggregate economic activity where work is organized mainly in the context of business (Mitchell and Burns 14). A cycle, according to this definition, consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals that merge into the expansion phase of the next cycle. This sequence of changes is recurrent but not periodic. In duration business cycles vary from more than one year to ten or twelve years, and they are not divisible into shorter cycles of similar character with amplitudes approximating their own.
The hypothetical, or regular, business cycle is a wavelike phenomenon that moves smoothly from "boom to recession and back again to boom" (Gwartney, Stroup, and Studenmund 176). As they actually occur, however, business cycles are typically irregular. The irregularity of cycles occurs in varying durations for the overall cycle, varying durations for cycle phases expansion, boom, contraction, and recession, and an absence of smoothness in the movement from cycle phase to the next. These characteristics of actual cyclical activity cause problems in both definition and measurement.
The traditional approach to the measurement of the business cycle is to proceed from the beginning of expansion in one cycle to the beginning of expansion in the next cycle. This measurement approach is the one adopted by the NBER, and is referred to as trough to trough cycle measurement. The most important criterion in measurement of the business cycle, however, is not the selection of a particular phase of the cycle, such as expansion, as it is the selection of the beginning and ending points as ...