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Business cycle asymmetry and duration dependence: An international perspective

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  • Terence Mills

Abstract

The business cycle behaviour of macroeconomic variables has long been of interest to economists, and attention has recently focused on two aspects of this behaviour - the 'stylized facts' of cyclical asymmetry and duration dependence. Cyclical asymmetry is where the economy behaves differently over the expansion and recession phases of the business cycle. Duration dependence, on the other hand, concerns the question of whether, for example, the probability of a cyclical expansion is dependent on how long the expansion has been running, or whether business cycle lengths tend to cluster around a particular duration. Using an international data set containing annual output per capita for 22 countries, we focus attention on non-parametric techniques for extracting cyclical components and for modelling and testing asymmetry and duration dependence. Once outliers, primarily associated with wars, are omitted, there is little international evidence of asymmetry. There is considerably more evidence of duration dependence, which is detected in the majority of countries using a variety of non-parametric tests. There is thus widespread evidence against the constant hazard hypothesis that cyclical patterns occur simply by chance. Business cycle durations do appear to cluster around certain values, with the average duration being about 3.6 years.

Suggested Citation

  • Terence Mills, 2001. "Business cycle asymmetry and duration dependence: An international perspective," Journal of Applied Statistics, Taylor & Francis Journals, vol. 28(6), pages 713-724.
  • Handle: RePEc:taf:japsta:v:28:y:2001:i:6:p:713-724
    DOI: 10.1080/02664760120059246
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    References listed on IDEAS

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    Cited by:

    1. Rose Cunningham & Ilan Kolet, 2007. "Housing Market Cycles and Duration Dependence in the United States and Canada," Staff Working Papers 07-2, Bank of Canada.
    2. Deleersnyder, B. & Dekimpe, M.G. & Sarvary, M. & Parker, P.M., 2003. "Weathering Tight Economic Times: The Sales Evolution Of Consumer Durables Over The Business Cycle," ERIM Report Series Research in Management ERS-2003-046-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    3. Castro, Vítor, 2010. "The duration of economic expansions and recessions: More than duration dependence," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 347-365, March.
    4. Lyubomir Ivanov, 2005. "Is "The ideal filter" really Ideal: The usage of Frequency Filtering and Spurious Cycles," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 3(1), pages 79-96.
    5. Ricardo Hausmann & Rodrigo Wagner & Francisco Rodriguez, 2006. "Growth Collapses," CID Working Papers 136, Center for International Development at Harvard University.

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