Disentangling economic recessions and depressions

Bertrand Candelon, Norbert Metiu and Stefan Straetmans

No 43/2013, Discussion Papers from Deutsche Bundesbank

Abstract: We propose a nonparametric test that distinguishes 'depressions' and 'booms' from ordinary recessions and expansions. Depressions and booms are defined as coming from another underlying process than recessions and expansions. We find four depressions and booms in the NBER business cycle between 1919 and 2009, including the Great Depression and the World War II boom. Our results suggest that the recent Great Recession does not qualify as a depression. Multinomial logistic regressions show that stock returns, output growth, and inflation exhibit predictive power for depressions. Surprisingly, the term spread is not a leading indicator of depressions, in contrast to recessions.

Keywords: Business cycles; Depression; Leading indicators; Multinomial logistic regression; Nonparametric statistics; Outlier (search for similar items in EconPapers)
JEL-codes: C14 C35 E32 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Disentangling economic recessions and depressions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:432013

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