Abstract
In a 2019 article published in this journal, Kyer and Maggs examined the frequency and characteristics of double-dip recessions and multi-dip recessions for 21 countries during the 1960:1 to 2014:4 period. A review of Kyer and Maggs generated a number of questions about a particular feature of their business cycle dating methodology. Specifically, they determined that a recession ends once real gross domestic product returns to or exceeds the previous peak level of real gross domestic product. To demonstrate the impact this nontraditional feature of their methodology has on their results and conclusions, this paper repeats their analysis where, in contrast to Kyer and Maggs, it is assumed that a recession ends once the economy reaches the trough quarter in a business cycle. The application of this more traditional feature of business cycle dating methodology to the same countries and sample period yields results that do not support their conclusions about either the frequency of double-dip recessions or the number of countries in their sample that experienced multi-dip recessions. This paper first shows that double-dip recessions represent just 7.2% of all recessions and, therefore, are not as common as Kyer and Maggs reported. Second, only five of the 21 countries experienced recessions with two or more additional dips in economic activity over the entire sample period. Finally, only six countries experienced a multi-dip recession during the Great Recession.
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Data Availability
Two appendixes that contain the real GDP data used in this paper are available upon request from the author.
Notes
I thank the referee for suggesting this additional explanation for the use of the rule-of-thumb definition.
This interpretation of the trough quarter is consistent with Gordon (2003, p. 11) who explained that “the trough is the lowest point reached by real output in each business cycle.”
Rudebusch and Williams (2009) and Berge and Jorda (2011) used a third method to determine the end of 2Qtr rule-identified recessions where recessions are assumed to end once the economy experiences any increase in real GDP. This methodology implies that recessions consist solely of consecutive quarterly reductions in real GDP. Not only does this methodology reduce the duration of recessions but it also precludes the possibility of any MDR. For that reason, this paper does not include an analysis of the Rudebusch and Williams (2009) and Berge and Jorda (2011) methodology.
The RP method again indicates that recessions end once the economy reaches the reversion point quarter. Therefore, regardless of how many additional two or more consecutive quarter reductions in real GDP occur between points A and A’ in Fig. 2, the RP method will identify just one recession during that period. That is not necessarily the case with the T method. After the start of a recession, a subsequent two or more consecutive quarter reduction in real GDP that occurs after the trough quarter (i.e., the end of what is now the first recession) but before the reversion point quarter would be identified as a new and separate recession with the T method. Therefore, the T method would yield, in this case, two separate recessions between points A and A'. With the RP method, any two or more consecutive quarter reduction in real GDP that occurs after QT but before QRP would be identified as an additional dip in real GDP and not a second recession.
Bollen et al. (2015, p. 4) defined replicability as “the ability of a researcher to duplicate the results of a prior study if the same procedures are followed but new data are collected.”
Because quarterly measures of real GDP start in 1961:1 for Canada, all results for Canada are based on the 1961:1 to 2014:4 period.
Using the more recently obtained data through 2021:1, the reversion point quarters for Finland, Italy, Portugal, and Spain could be identified. Therefore, the final values of the dips and duration variables could be determined using this larger data set. These values are included in parentheses. The notes to Table 4 discuss the results reported for Greece.
For those countries where the final trough quarter and/or final reversion point quarter could not be determined based on data through 2014:4, the sample period was extended to 2021:1. Calculations based on this extended sample period are included in parentheses in Table 4.
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Acknowledgements
I thank an anonymous referee whose comments and suggestions improved the paper. Any remaining errors are the author’s. I also thank Amelia Ashton, Lucas Knapton, and Melissa Zhang for their research assistance.
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Findlay, D.W. To Dip or Not to Dip? A Comment on Kyer and Maggs (2019). Int Adv Econ Res 30, 47–63 (2024). https://doi.org/10.1007/s11294-024-09889-y
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DOI: https://doi.org/10.1007/s11294-024-09889-y