Business Cycle in Singapore during the Period from 1981 to 2021

Abstract

Undoubtedly, the concept of the business cycle has become a crucial topic of research, given that the business cycle reflects a nation's economic development and that assessing the business cycle lays the groundwork for a nation to introduce a diverse array of economic policies. This research study aims to evaluate Singapore's business cycles from 1971 to 2021, a span of 41 years. The yearly real GDP and several of its components (private consumption, gross fixed capital formation, and government consumption spending), and CPI were filtered utilizing the Hodrick-Prescott method. Taking the cyclical components of real GDP as the reference cycle and other economic indicators as specific cycles, the author assessed and measured the fluctuations and co-movements between them with the application of standard deviation and correlation coefficient. Last, a few policy suggestions are proposed. There are five main conclusions in this article: (1) Singapore's real GDP is highly susceptible to changes in the international environment; (2) Private consumption, investment, and CPI have a positive and significant correlation with GDP, and investment is of greater relevance to economic growth in the short run; (3) Government expenditure and GDP are negatively correlated; (4) Private investment appears to be a possible cause of business cycle shocks due to the most dramatic fluctuation; and (5) The government of Singapore should encourage private investment so as to boost economic prosperity in the short term, and then promote private consumption to achieve national prosperity in the long run.