Common sources of recent developments What I do want to focus on this afternoon are possible common sources for the developments pictured in figure 2 and the relation of any imbalance between aggregate supply and demand to those developments. There are, I believe, some common sources of the developments pictured in figure 2. First, these variables are all cyclically sensitive.
During expansions, equity prices tend to rise, although they often decline before a downturn in the economy. Discerning a consistent pattern for the saving rate during an expansion from the chart is more difficult: too many other factors play a role. But regression analysis indicates that the saving rate tends to move countercyclically.