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Press Release

Cleveland Fed researchers assess whether using GDI as our measure of output changes our understanding of the business cycle

Does using an alternative measure of aggregate output known as Gross Domestic Income (GDI) change our understanding of key features of the business cycle? Federal Reserve Bank of Cleveland researchers Mark Bognanni and Christian Garciga revisit an exercise of Stock and Watson (1999) in which they document business cycle regularities using GDP, but Bognanni and Garciga also redo the calculations using GDI as the measure of output. They find that cyclical fluctuations in both measures have been broadly in line with one another, with two notable exceptions: In two of the last three recessions, the “GDI business cycle” turned downwards earlier than GDP.

“These results suggest that GDI may hold particular value for detecting business cycle turning points,” say the researchers, who suggest that further research exploiting the information content of GDI is warranted.

Bognanni and Garciga also compare how the cyclical components of various macroeconomic indicators – such as aggregate consumption and investment, unemployment, prices, and interest rates -- move in relation to the cyclical components of GDP and GDI. They find that the correlations are relatively unaffected by which measure of output is used. “Whether we examine GDP or GDI makes little systematic difference to our understanding of how various indicators comove over the business cycle,” say the researchers.

Read Does GDI Data Change our Understanding of the Business Cycle?

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell,, 513.455.4479