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The duration of business cycle expansions and contractions: are there change-points in duration dependence?

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  • Vitor Castro

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Abstract

The business cycles literature shows that the likelihood of an expansion or contraction ending increases with its age, i.e. they exhibit positive duration dependence. This evidence rests on the assumption that the magnitude of duration dependence is the same over time. However, we assume that the degree of likeliness of an expansion or contraction ending as it gets older might indeed change after a specific duration. Estimating a continuous-time Weibull model for a group of 13 industrial countries over the period 1948–2009 and allowing for the presence of a change-point in the duration-dependence parameter; we conclude that the evidence of positive duration dependence is no longer present when an expansion surpasses 10 years of duration. Copyright Springer-Verlag 2013

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File URL: http://hdl.handle.net/10.1007/s00181-011-0544-2
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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 44 (2013)
Issue (Month): 2 (April)
Pages: 511-544

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Handle: RePEc:spr:empeco:v:44:y:2013:i:2:p:511-544

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Keywords: Business cycles; Expansions; Contractions; Duration dependence; C41; E32;

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  1. Jushan Bai, 1997. "Estimation Of A Change Point In Multiple Regression Models," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 551-563, November.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Briefer economic cycles
    by Salil Mehta in Statistical Ideas on 2014-03-04 01:34:00
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Cited by:
  1. Luca Agnello & Vitor Castro & Ricardo M. Sousa, 2013. "Are There Change-Points in the Likelihood of a Fiscal Consolidation Ending?," GEMF Working Papers 2013-06, GEMF - Faculdade de Economia, Universidade de Coimbra.
  2. Vitor Castro & Megumi Kubota, 2013. "Duration dependence and change-points in the likelihood of credit booms ending," GEMF Working Papers 2013-17, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. Luca Agnello & Vítor Castro & Ricardo M. Sousa, 2012. "What determines the duration of a fiscal consolidation program?," NIPE Working Papers 17/2012, NIPE - Universidade do Minho.

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