International evidence on business cycle magnitude dependence

Euro-American Association of Economic Development Studies
Publication Type:
Journal Article
International Journal of Applied Econometrics and Quantitative Studies, 2005, 2 (1), pp. 5 - 16
Issue Date:
Full metadata record
Are expansions and recessions more likely to end as their magnitude increases? In this paper we apply parametric hazard models to investigate this issue in a sample of 16 countries from 1881 to 2000. For the total sample we find evidence of positive magnitude dependence for recessions, while for expansions we are not able to reject the null of magnitude independence. This last result is likely due to a structural change in the mechanism guiding expansions before and after the second World War. In particular, upturns show negative magnitude dependence in the post-World War II sub-sample, meaning that in this period expansions become less likely to end as their magnitude increases.
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