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International evidence on business cycle magnitude dependence

  • Corrado Di Guilmi
  • Edoardo Gaffeo
  • Mauro Gallegati
  • Antonio Palestrini

Are expansions and recessions more likely to end as their magnitude increases? In this paper we apply parametric hazard models to investigate this issue in a sample of 16 countries from 1881 to 2000. For the total sample we find evidence of positive magnitude dependence for recessions, while for expansions we are not able to reject the null of magnitude independence. This last result is likely due to a structural change in the mechanism guiding expansions before and after the second World War. In particular, upturns show negative magnitude dependence in the post-World War II sub-sample, meaning that in this period expansions become less likely to end as their magnitude increases.

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Paper provided by in its series Papers with number cond-mat/0401495.

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Date of creation: Jan 2004
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Handle: RePEc:arx:papers:cond-mat/0401495
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  1. Lancaster, Tony, 1979. "Econometric Methods for the Duration of Unemployment," Econometrica, Econometric Society, vol. 47(4), pages 939-56, July.
  2. McCulloch, J Hutson, 1975. "The Monte Carlo Cycle in Business Activity," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 303-21, September.
  3. Don Harding & Adrian Pagan, 2000. "Disecting the Cycle: A Methodological Investigation," Econometric Society World Congress 2000 Contributed Papers 1164, Econometric Society.
  4. McDonald, James B & Butler, Richard J, 1987. "Some Generalized Mixture Distributions with an Application to Unemployment Duration," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 232-40, May.
  5. Zuehlke, Thomas W, 2003. "Business Cycle Duration Dependence Reconsidered," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(4), pages 564-69, October.
  6. Daniel E. Sichel, 1989. "Business cycle duration dependence: a parametric approach," Working Paper Series / Economic Activity Section 98, Board of Governors of the Federal Reserve System (U.S.).
  7. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, December.
  8. Christina D. Romer, 1999. "Changes in Business Cycles: Evidence and Explanations," NBER Working Papers 6948, National Bureau of Economic Research, Inc.
  9. Francis X. Diebold & Glenn D. Rudebusch & Daniel E. Sichel, 1991. "Further evidence on business cycle duration dependence," Working Papers 91-11, Federal Reserve Bank of Philadelphia.
  10. Francis X. Diebold & Glenn D. Rudebusch, 1988. "A nonparametric investigation of duration dependence in the American business cycle," Working Paper Series / Economic Activity Section 90, Board of Governors of the Federal Reserve System (U.S.).
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