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The durations of recession and prosperity: does their distribution follow a power or an exponential law?

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  • Ausloos, Marcel
  • Miśkiewicz, Janusz
  • Sanglier, Michèle

Abstract

Following findings by Ormerod and Mounfield (Physica A 293 (2001) 573) Wright (The duration of recessions follows an exponential nota power law, cond-mat/0311585) rises the problem whether a power (Ormerod and Mounfield, 2001) or an exponential law (Wright) describes the distribution of occurrences of economic recession periods. In order to clarify the controversy a different set of GDP data are hereby examined. The conclusion about a power law distribution of recession periods seems better though the matter is not entirely settled. The case of prosperity duration is also studied and is found to follow a power law. Universal but also non universal features between recession and prosperity cases are emphasized. Considering that the economy is basically a bistable (recession/prosperity) system we may derive a characteristic (de)stabilisation time. 89.65.Gh; 05.45.Tp; 02.70.Rv Econophysics; Time series analysis; Power law; Exponential law; Recession; Prosperity

Suggested Citation

  • Ausloos, Marcel & Miśkiewicz, Janusz & Sanglier, Michèle, 2004. "The durations of recession and prosperity: does their distribution follow a power or an exponential law?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 339(3), pages 548-558.
    • Handle: RePEc:eee:phsmap:v:339:y:2004:i:3:p:548-558
    DOI: 10.1016/j.physa.2004.03.005
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    References listed on IDEAS

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    1. Miśkiewicz, J. & Ausloos, M., 2004. "A logistic map approach to economic cycles. (I). The best adapted companies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(1), pages 206-214.
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    5. Ausloos, M & Clippe, P & Pekalski, A, 2004. "Model of macroeconomic evolution in stable regionally dependent economic fields," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 337(1), pages 269-287.
    6. Ormerod, Paul & Mounfield, Craig, 2001. "Power law distribution of the duration and magnitude of recessions in capitalist economies: breakdown of scaling," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 293(3), pages 573-582.
    7. Ausloos, Marcel & Clippe, Paulette & Pȩkalski, Andrzej, 2004. "Evolution of economic entities under heterogeneous political/environmental conditions within a Bak–Sneppen-like dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 332(C), pages 394-402.
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