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The durations of recession and prosperity: does their distribution follow a power or an exponential law?

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  • Marcel Ausloos
  • Janusz Miskiewicz
  • Michele Sanglier

Abstract

Following findings by Ormerod and Mounfield, Wright rises the problem whether a power or an exponential law describes the distribution of occurrences of economic recession periods. In order to clarify the controversy a different set of GDP data is hereby examined. The conclusion about a power law distribution of recession periods seems better though the matter is not entirely settled. The case of prosperity duration is also studied and is found to follow a power law. Universal but also non universal features between recession and prosperity cases are emphasized. Considering that the economy is basically a bistable (recession/prosperity) system we may derive a characteristic (de)stabilisation time.

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  • Marcel Ausloos & Janusz Miskiewicz & Michele Sanglier, 2004. "The durations of recession and prosperity: does their distribution follow a power or an exponential law?," Papers cond-mat/0403143, arXiv.org.
  • Handle: RePEc:arx:papers:cond-mat/0403143
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    References listed on IDEAS

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    1. Ausloos, Marcel & Clippe, Paulette & Pȩkalski, Andrzej, 2004. "Evolution of economic entities under heterogeneous political/environmental conditions within a Bak–Sneppen-like dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 332(C), pages 394-402.
    2. Aoki, Masanao, 1998. "Simple Model Of Asymmetrical Business Cycles: Interactive Dynamics Of A Large Number Of Agents With Discrete Choices," Macroeconomic Dynamics, Cambridge University Press, vol. 2(04), pages 427-442, December.
    3. Ausloos, M & Clippe, P & Pekalski, A, 2004. "Model of macroeconomic evolution in stable regionally dependent economic fields," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 337(1), pages 269-287.
    4. Miśkiewicz, J. & Ausloos, M., 2004. "A logistic map approach to economic cycles. (I). The best adapted companies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(1), pages 206-214.
    5. Mizuno, T. & Takayasu, M. & Takayasu, H., 2002. "The mechanism of double-exponential growth in hyper-inflation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 308(1), pages 411-419.
    6. Ausloos, Marcel & Clippe, Paulette & Pȩkalski, Andrzej, 2003. "Simple model for the dynamics of correlations in the evolution of economic entities under varying economic conditions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 330-337.
    7. Michal Kalecki, 1937. "A Theory of the Business Cycle," Review of Economic Studies, Oxford University Press, vol. 4(2), pages 77-97.
    8. Ormerod, Paul & Mounfield, Craig, 2001. "Power law distribution of the duration and magnitude of recessions in capitalist economies: breakdown of scaling," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 293(3), pages 573-582.
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    Cited by:

    1. Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Tania Treibich, 2014. "The Short- and Long-Run Damages of Fiscal Austerity: Keynes beyond Schumpeter," LEM Papers Series 2014/22, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Ausloos, Marcel, 2012. "Econophysics of a religious cult: The Antoinists in Belgium [1920–2000]," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(11), pages 3190-3197.
    3. Wright, Ian, 2009. "Implicit Microfoundations for Macroeconomics," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-27.
    4. Wright, Ian, 2005. "The social architecture of capitalism," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 346(3), pages 589-620.
    5. Matutinović, Igor & Salthe, Stanley N. & Ulanowicz, Robert E., 2016. "The mature stage of capitalist development: Models, signs and policy implications," Structural Change and Economic Dynamics, Elsevier, vol. 39(C), pages 17-30.
    6. Paul Ormerod & Amy Heineike, 2009. "Global recessions as a cascade phenomenon with interacting agents," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 4(1), pages 15-26, June.
    7. Dosi, Giovanni & Fagiolo, Giorgio & Napoletano, Mauro & Roventini, Andrea & Treibich, Tania, 2015. "Fiscal and monetary policies in complex evolving economies," Journal of Economic Dynamics and Control, Elsevier, vol. 52(C), pages 166-189.
    8. Marcel Ausloos, 2014. "A biased view of a few possible components when reflecting on the present decade financial and economic crisis," Papers 1412.0127, arXiv.org.
    9. Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Tania Treibich, 2017. "Micro and macro policies in the Keynes+Schumpeter evolutionary models," Journal of Evolutionary Economics, Springer, vol. 27(1), pages 63-90, January.
    10. Redelico, Francisco O. & Proto, Araceli N. & Ausloos, Marcel, 2008. "Power law for the duration of recession and prosperity in Latin American countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(25), pages 6330-6336.
    11. Anca Gheorghiu & Ion Spanulescu, 2012. "An Econophysics Model for the Migration Phenomena," Papers 1202.0996, arXiv.org.
    12. Redelico, Francisco O. & Proto, Araceli N. & Ausloos, Marcel, 2009. "Hierarchical structures in the Gross Domestic Product per capita fluctuation in Latin American countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(17), pages 3527-3535.
    13. Tomson Ogwang, 2011. "Power laws in top wealth distributions: evidence from Canada," Empirical Economics, Springer, vol. 41(2), pages 473-486, October.
    14. Bai, Man-Ying & Zhu, Hai-Bo, 2010. "Power law and multiscaling properties of the Chinese stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(9), pages 1883-1890.

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