The time structure of production in the US, 2002–2009
Andrew T. Young
Published online: 25 June 2011
Springer Science+Business Media, LLC 2011
Abstract The US time structure of production during the 2002 through 2009
business cycle is characterized empirically using industry-level input-output data. An
industry’s total industry output requirement (TIOR) is proposed as a metric for
“roundaboutness”. I find that the time structure of production lengthened following
the Federal Reserve’s 2002 expansionary deviation from the Taylor rule and then
contracted during the Great Recession. Value added growth in the most-roundabout
of US industries accelerated relative to that of the least-roundabout industries.
Heading into the Great Recession, value-added growth in the most-roundabout
industries contracted early and turned negative in 2007 while value-added growth in
the least-roundabout industries remained positive until 2009. The stylized facts of
the time structure of production are consistent with Austrian Business Cycle Theory.
Keywords Austrian business cycle theory
Time structure of
Roundabout methods of production
JEL Codes E32
The US economy experienced a robust expansion following the 2001 recession and its
November trough. This expansion lasted for just a month shy of 7 years according to
to an end on the heels of a severe financial markets crisis. What followed was,
according to many, the worst US recession since the Great Depression.
At least in retrospect, the 2002 through 2007 expansion had many hallmarks of an
unsustainable boom. The Austrian theory of the business cycle (ABCT) (Mises
1934; Hayek 1933, 1935) provides an account of how credit inflation on the part of a
central bank can push interest rates below their “natural” rates and entice
Rev Austrian Econ (2012) 25:77–92
I thank an anonymous referee for helpful comments.
A. T. Young (*)
Department of Economics, West Virginia University, Morgantown, WV 26506-6025, USA