Abstract
The modulated power law process is used to analyze the duration dependence in US business cycles. The model makes less restricting assumptions than traditional models do and measures both the local and global performance of business cycles. The results indicate evidence of positive duration dependence in the U.S. business cycles. Structural change after WWII in both expansion and contraction phases of business cycles is also documented. Hypothesis tests confirm that the model fits US business cycles.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Basu S, Taylor AM (1999) Business cycles in international historical perspective. J Econ Perspectives 13:45–68
Berman M (1981) Inhomogeneous and modulated gamma process. Biometrika 68:143–152
Black SE, Rigdon SE (1996) Statistical inference for a modulated power law process. J Quality Technol 28:81–90
Cochran SJ, Defina RH (1995) Duration dependence in the US stock market cycle: a parametric approach. Appl Financial Econ 5:309–318
Diebold F, Rudebusch G (1987) Does the business cycle have duration memory? Special studies no. 223 Board of Governors of the Federal Reserve System
Harman YS, Zuehlke TW. Nonlinear duration dependence in stock market cycles. Rev Financial Econ (in press)
Lakey MJ, Rigdon SE (1992) The modulated power law process. In: Proceedings for the 45th annual quality congress. American Society of Quality Control, Milwaukee, WI, pp 559–563
Leeuw FD (1987) Do expansions have memory? Discussion paper no. 16 Bureau of Economic Analysis
McCulloch JH (1975) The Monte-Carlo cycle in business activity. Econ Inquiry 13:303–321
Romer CD (1999) Changes in business cycles: evidence and explanations. NBER working paper 6948
Savin NE (1977) A test of the Monte-Carlo hypothesis: comment. Econ Inquiry 15:613–617
Sichel DE (1991) Business cycle duration dependence: a parametric approach. Rev Econ Stat 73:254–260
So JC (1994) The distribution of financial ratios—a note. J Accounting Auditing Finance 9:215–223
Taylor JB (1998) Monetary policy and the long boom. Federal Reserve Bank St. Louis Rev 80:3–11
Zuehlke TW (2003) Business cycle duration dependence reconsidered. J Business Econ Stat 21:564–569
Acknowledgement
We thank James E. Payne (the Editor) and an anonymous referee for providing helpful comments that have significantly improved the paper. We are grateful to James R. Webb, Jacky Yuk-chow So, Mostafa Mashayekhi, Ma. Zenia N. Agustin, James R. Schmidt, Edward Lawrence and participants at the finance seminar at the University of Nebraska-Lincoln and at the 2004 Southern Economic Association annual meeting for helpful discussions and comments.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Zhou, H., Rigdon, S.E. Duration dependence in US business cycles: An analysis using the modulated power law process. J Econ Finan 32, 25–34 (2008). https://doi.org/10.1007/s12197-007-9005-3
Published:
Issue Date:
DOI: https://doi.org/10.1007/s12197-007-9005-3