Sectoral dynamics and business cycles

I construct an index of sectoral dynamics to characterize changes in the sectoral composition of economic activity. There is evidence of asymmetry in different phases of business cycles with recessions being associated with larger changes in sectoral composition than expansions. Since the 1990s, while sectoral changes appear to be smaller and spread across more sectors, the correlation between sectoral dynamics and GDP growth is higher. I find that recession duration in the impulse response functions from a VAR of sectoral dynamics and GDP growth rate is similar to recession duration observed in the data. Published by Elsevier B.V.