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The duration of business cycle expansions and contractions: are there change-points in duration dependence?

Empirical Economics volume 44, pages 511–544 (2013)Cite this article

Abstract

The business cycles literature shows that the likelihood of an expansion or contraction ending increases with its age, i.e. they exhibit positive duration dependence. This evidence rests on the assumption that the magnitude of duration dependence is the same over time. However, we assume that the degree of likeliness of an expansion or contraction ending as it gets older might indeed change after a specific duration. Estimating a continuous-time Weibull model for a group of 13 industrial countries over the period 1948–2009 and allowing for the presence of a change-point in the duration-dependence parameter; we conclude that the evidence of positive duration dependence is no longer present when an expansion surpasses 10 years of duration.

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Authors and Affiliations

  1. Faculty of Economics, University of Coimbra, Avenida Dias da Silva, 165, 3004-512, Coimbra, Portugal

    Vitor Castro

  2. Economic Policies Research Unit (NIPE), University of Minho, Campus de Gualtar, 4710-057, Braga, Portugal

    Vitor Castro

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  1. Vitor Castro
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Correspondence to Vitor Castro.

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Castro, V. The duration of business cycle expansions and contractions: are there change-points in duration dependence?. Empir Econ 44, 511–544 (2013). https://doi.org/10.1007/s00181-011-0544-2

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  • DOI: https://doi.org/10.1007/s00181-011-0544-2

Keywords

  • Business cycles
  • Expansions
  • Contractions
  • Duration dependence

JEL Classification

  • C41
  • E32