Business cycle duration dependence and foreign recessions

Gabe de Bondt and Philip Vermeulen

No 2205, Working Paper Series from European Central Bank

Abstract: We estimate business cycle regime switching logit models for G7 countries to determine the effect of duration of the current business cycle phase and of foreign recessions on the likelihood that expansions and recessions come to an end. With respect to expansions in a G7 country, we find that the probability they end roughly doubles each time another G7 country falls into a recession. We also find that expansions in the US and Germany are duration dependent, i.e. are more likely to end as they grow older. This contrasts with other G7 countries where expansions are not duration dependent. With respect to recessions in a G7 country, we find that the likelihood of them coming to an end is not affected by other G7 countries’ recessions. We find duration dependence of recessions for all G7 countries, i.e. recessions that have gone on for a while are more likely to end. JEL Classification: E32, C41

Keywords: business cycles; duration dependence; recessions; regime switching logit model (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-mac and nep-opm
Note: 337418
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Business cycle duration dependence and foreign recessions (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20182205

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