IDEAS home Printed from https://ideas.repec.org/p/tin/wpaper/20180008.html
   My bibliography  Save this paper

An Epidemiological Model of Crisis Spread Across Sectors in The United States

Author

Listed:
  • Eva (E.F.) Janssens

    (Tinbergen Institute; Erasmus University of Rotterdam)

  • Robin (R.) Lumsdaine

    (American University, Erasmus University of Rotterdam)

  • Sebastiaan (S.H.L.C.G.) Vermeulen

    (Tinbergen Institute; Erasmus University of Rotterdam)

Abstract

This paper develops a discrete-time epidemiological model for the spread of crises across sectors in the United States for the period 1952-2015. It is the first to use an epidemiological approach with macroeconomic (Flow of Funds) data. An extension of the usual one-period Markov model to a two-period setting incorporates the concept of downturns that may either precede a crisis or from which the sector may recover and avert a crisis. The results indicate that the nonfinancial business and private depository institutions & money market mutual funds sectors are highly contagious while the monetary authority is the least contagious.

Suggested Citation

  • Eva (E.F.) Janssens & Robin (R.) Lumsdaine & Sebastiaan (S.H.L.C.G.) Vermeulen, 2018. "An Epidemiological Model of Crisis Spread Across Sectors in The United States," Tinbergen Institute Discussion Papers 18-008/III, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20180008
    as

    Download full text from publisher

    File URL: https://papers.tinbergen.nl/18008.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Harding, Don & Pagan, Adrian, 2003. "Rejoinder to James Hamilton," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1695-1698, July.
    2. Robert J. Shiller, 2014. "Speculative Asset Prices (Nobel Prize Lecture)," Cowles Foundation Discussion Papers 1936, Cowles Foundation for Research in Economics, Yale University.
    3. Billio, Monica & Getmansky, Mila & Lo, Andrew W. & Pelizzon, Loriana, 2012. "Econometric measures of connectedness and systemic risk in the finance and insurance sectors," Journal of Financial Economics, Elsevier, vol. 104(3), pages 535-559.
    4. Robert J. Shiller, 2014. "Speculative Asset Prices," American Economic Review, American Economic Association, vol. 104(6), pages 1486-1517, June.
    5. Harding, Don & Pagan, Adrian, 2003. "A comparison of two business cycle dating methods," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1681-1690, July.
    6. Guidolin, Massimo & Timmermann, Allan, 2007. "Asset allocation under multivariate regime switching," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3503-3544, November.
    7. Glasserman, Paul & Young, H. Peyton, 2015. "How likely is contagion in financial networks?," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 383-399.
    8. Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1, National Bureau of Economic Research, Inc.
    9. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    10. Paul Glasserman & Peyton Young, 2015. "Contagion in Financial Networks," Economics Series Working Papers 764, University of Oxford, Department of Economics.
    11. Gai, Prasanna & Haldane, Andrew & Kapadia, Sujit, 2011. "Complexity, concentration and contagion," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 453-470.
    12. Gerhard Bry & Charlotte Boschan, 1971. "Standard Business Cycle Analysis of Economic Time Series," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages 64-150, National Bureau of Economic Research, Inc.
    13. Peng, Roger, 2008. "A Method for Visualizing Multivariate Time Series Data," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 25(c01).
    14. Hamilton, James D., 2003. "Comment on "A comparison of two business cycle dating methods"," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1691-1693, July.
    15. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, July.
    16. Nikolaos Demiris & Theodore Kypraios & L. Vanessa Smith, 2014. "On the epidemic of financial crises," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 177(3), pages 697-723, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eva F. Janssens & Robin L. Lumsdaine & Sebastiaan H.L.C.G. Vermeulen, 2022. "An Epidemiological Model of Economic Crisis Spread across Sectors in the United States," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(4), pages 885-919, June.
    2. Erik Kole & Dick Dijk, 2017. "How to Identify and Forecast Bull and Bear Markets?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(1), pages 120-139, January.
    3. Calderón, César & Fuentes, J. Rodrigo, 2014. "Have business cycles changed over the last two decades? An empirical investigation," Journal of Development Economics, Elsevier, vol. 109(C), pages 98-123.
    4. Nissilä, Wilma, 2020. "Probit based time series models in recession forecasting – A survey with an empirical illustration for Finland," BoF Economics Review 7/2020, Bank of Finland.
    5. Eduardo Bandrés & María Dolores Gadea-Rivas & Ana Gómez-Loscos, 2017. "Regional business cycles across europe," Occasional Papers 1702, Banco de España.
    6. Maria Gadea & Ana Gómez-Loscos & Antonio Montañés, 2012. "Cycles inside cycles: Spanish regional aggregation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(4), pages 423-456, December.
    7. Quintero Otero, Jorge David & Padilla Sierra, Alcides de Jesús, 2024. "Impacto de la sincronización sub-nacional sobre el comportamiento de los ciclos nacionales en economías emergentes con inflación objetivo," Documentos Departamento de Economía 54, Universidad del Norte.
    8. Francis W. Ahking, 2015. "Measuring U.S. Business Cycles: A Comparison of Two Methods and Two Indicators of Economic Activities (With Appendix A)," Working papers 2015-06, University of Connecticut, Department of Economics.
    9. Edwards, Sebastian & Biscarri, Javier Gomez & Perez de Gracia, Fernando, 2003. "Stock market cycles, financial liberalization and volatility," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 925-955, December.
    10. Haase, Felix & Neuenkirch, Matthias, 2023. "Predictability of bull and bear markets: A new look at forecasting stock market regimes (and returns) in the US," International Journal of Forecasting, Elsevier, vol. 39(2), pages 587-605.
    11. Javier Gómez Biscarri, 2002. "Dating Recessions from Industrial Production Indexes: An Analysis for Europe and the US," Faculty Working Papers 05/02, School of Economics and Business Administration, University of Navarra.
    12. Ahking, Francis W., 2014. "Measuring U.S. business cycles: A comparison of two methods and two indicators of economic activities," Journal of Economic and Social Measurement, IOS Press, issue 4, pages 199-216.
    13. Domenico Giannone & Lucrezia Reichlin, 2004. "Euro area and US recessions: 1970-2003," ULB Institutional Repository 2013/6405, ULB -- Universite Libre de Bruxelles.
    14. Carlo Altavilla, 2004. "Do EMU Members Share the Same Business Cycle?," Journal of Common Market Studies, Wiley Blackwell, vol. 42(5), pages 869-896, December.
    15. James Morley & Jeremy Piger, 2006. "The Importance of Nonlinearity in Reproducing Business Cycle Features," Contributions to Economic Analysis, in: Nonlinear Time Series Analysis of Business Cycles, pages 75-95, Emerald Group Publishing Limited.
    16. Michael Artis & Massimiliano Marcellino & Tommaso Proietti, 2004. "Dating Business Cycles: A Methodological Contribution with an Application to the Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(4), pages 537-565, September.
    17. Javier De Peña & Luis A. Gil-Alana, 2002. "Do Spanish Stock Market Prices Follow a Random Walk?," Faculty Working Papers 01/02, School of Economics and Business Administration, University of Navarra.
    18. Viv B. Hall & C. John McDermott, 2006. "The New Zealand Business Cycle: Return To Golden Days?," CAMA Working Papers 2006-21, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    19. Beate Schirwitz, 2013. "Business Fluctuations, Job Flows and Trade Unions - Dynamics in the Economy," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 47.
    20. Aastveit, Knut Are & Jore, Anne Sofie & Ravazzolo, Francesco, 2016. "Identification and real-time forecasting of Norwegian business cycles," International Journal of Forecasting, Elsevier, vol. 32(2), pages 283-292.

    More about this item

    Keywords

    Flow of Funds; economic downturns; Susceptible-Infected-Removed(SIR); contagion; epidemiology;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • G01 - Financial Economics - - General - - - Financial Crises

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tin:wpaper:20180008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tinbergen Office +31 (0)10-4088900 (email available below). General contact details of provider: https://edirc.repec.org/data/tinbenl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.