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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. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
  2. Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini, 2006. "Are Output Growth-Rate Distributions Fat-Tailed? Some Evidence from OECD Countries," LEM Papers Series 2006/23, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Papers cond-mat/9804100, arXiv.org.
  4. Giorgio Fagiolo & Mauro Napoletano & Marco Piazza & Andrea Roventini, 2009. "Detrending and the Distributional Properties of U.S. Output Time Series," LEM Papers Series 2009/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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  8. 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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  10. Nazrul Islam, 2003. "What have We Learnt from the Convergence Debate?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 309-362, 07.
  11. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  12. Canning, D. & Amaral, L. A. N. & Lee, Y. & Meyer, M. & Stanley, H. E., 1998. "Scaling the volatility of GDP growth rates," Economics Letters, Elsevier, vol. 60(3), pages 335-341, September.
  13. Quah, Danny T, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," Economic Journal, Royal Economic Society, vol. 106(437), pages 1045-55, July.
  14. Morten O. Ravn & Harald Uhlig, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CESifo Working Paper Series 479, CESifo Group Munich.
  15. 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.
  16. Davide Fiaschi & Andrea Mario Lavezzi, . "On the Determinants of Growth Volatility: a Nonparametric Approach," Discussion Papers 2003/25, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  17. repec:dgr:kubcen:199750 is not listed on IDEAS
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