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The Evolution of the Business Cycles and Growth Rates Distributions

  • Giulio Bottazzi
  • Marco Duenas

This paper performs an empirical analysis of the international cross sectional distribution of gross domestic product (GDP) growth rates and business cycles. We consider a balanced panel of 91 countries in the period 1960-2010 and two different measures of GDP fluctuations: the logarithmic growth rates and the Hodrick-Prescott cycles. Both measures are characterized by fat-tailed distributions and strong heteroscedasticity. The latter is the result of a scale relation between the variance of the fluctuations and the size of the country. The analysis of the time evolution of these properties shows that distribution tails become asymmetrically fatter during the period of study, suggesting an increased probability of finding high amplitude fluctuations in more recent years. Moreover, we observe significant changes in the scale parameter characterizing the relation between volatility and country size. These findings enrich the discussion about robust properties of business cycles and reveal more evidence about scaling-law relations in economic systems.

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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2012/22.

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Date of creation: 30 Nov 2012
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Handle: RePEc:ssa:lemwps:2012/22
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  1. Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini, 2006. "Are output growth-rate distributions fat-tailed? Some evidence from OECD countries," Sciences Po publications 36, Sciences Po.
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  8. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
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  11. Giorgio Fagiolo & Mauro Napoletano & Marco Piazza & Andrea Roventini, 2009. "Detrending and the Distributional Properties of U.S. Output Time Series," Economics Bulletin, AccessEcon, vol. 29(4), pages 3155-3161.
  12. Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
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  14. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
  15. Nazrul Islam, 2003. "What have We Learnt from the Convergence Debate?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 309-362, 07.
  16. Brock, W A, 1999. "Scaling in Economics: A Reader's Guide," Industrial and Corporate Change, Oxford University Press, vol. 8(3), pages 409-46, September.
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