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Business cycle duration dependence and foreign recessions

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  • Gabe de Bondt
  • Philip Vermeulen

Abstract

This study revisits business cycle duration dependence in G7 countries by controlling for foreign recessions, defined as the number of other G7 countries in a recession. Estimates from regime switching logit models show that the monthly likelihood of ending an expansion roughly doubles for every extra G7 country in recession, but the end of foreign recessions do not affect the ending of recessions. They also show that recessions are duration dependent in all G7 countries, but expansions only in the United States and Germany. The economic importance of foreign recessions and duration in driving business cycle phase changes vary across countries.

Suggested Citation

  • Gabe de Bondt & Philip Vermeulen, 2021. "Business cycle duration dependence and foreign recessions," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(1), pages 1-19, February.
    • Handle: RePEc:bla:scotjp:v:68:y:2021:i:1:p:1-19
    DOI: 10.1111/sjpe.12261
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    Cited by:

    1. Vitor Castro & Boris Fisera, 2022. "Determinants of the Duration of Economic Recoveries: The Role of ´Too Much Finance´," Working Papers IES 2022/33, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2022.
    2. Avdjiev, Stefan & Binder, Stephan & Sousa, Ricardo, 2021. "External debt composition and domestic credit cycles," Journal of International Money and Finance, Elsevier, vol. 115(C).
    3. Alex Botsis & Kevin Lee, 2022. "Nowcasting Using Firm-Level Survey Data; Tracking UK Output Fluctuations and Recessionary Events," Economic Statistics Centre of Excellence (ESCoE) Technical Reports ESCOE-TR-20, Economic Statistics Centre of Excellence (ESCoE).
    4. Hudepohl, Tom & van Lamoen, Ryan & de Vette, Nander, 2021. "Quantitative easing and exuberance in stock markets: Evidence from the euro area," Journal of International Money and Finance, Elsevier, vol. 118(C).

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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