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The changing economic regimes and expected time to recover of the peripheral countries under the euro: A nonparametric approach

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  • Damásio, Bruno
  • Louçã, Francisco
  • Nicolau, João

Abstract

A nonparametric method is presented in order to estimate the expected time to cross a threshold on the basis of two assumptions, a Markovian property and stationarity. An empirical application is provided, using this method to investigate the dynamics of the GDP of 16 countries of the European Union for a long period, 1962–2016, and to detect the patterns of growth rates and expected mean reversion time after a negative, i.e a recession, or a positive deviation from the trend. The conclusion supports the hypothesis of an economic regime change in the eurozone, affecting in particular the peripheral countries of southern Europe, ignited by the creation of the common currency.

Suggested Citation

  • Damásio, Bruno & Louçã, Francisco & Nicolau, João, 2018. "The changing economic regimes and expected time to recover of the peripheral countries under the euro: A nonparametric approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 507(C), pages 524-533.
    • Handle: RePEc:eee:phsmap:v:507:y:2018:i:c:p:524-533
    DOI: 10.1016/j.physa.2018.05.089
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    References listed on IDEAS

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    1. Murray, Christian J. & Papell, David H., 2002. "The purchasing power parity persistence paradigm," Journal of International Economics, Elsevier, vol. 56(1), pages 1-19, January.
    2. Damásio, Bruno & Nicolau, João, 2014. "Combining a regression model with a multivariate Markov chain in a forecasting problem," Statistics & Probability Letters, Elsevier, vol. 90(C), pages 108-113.
    3. Samuel Bowles & David M. Gordon & Thomas E. Weisskopf, 1986. "Power and Profits: The Social Structure of Accumulation and the Profitability of the Postwar U.S. Economy," Review of Radical Political Economics, Union for Radical Political Economics, vol. 18(1-2), pages 132-167, March.
    4. Lipsey, Richard G. & Carlaw, Kenneth I. & Bekar, Clifford T., 2005. "Economic Transformations: General Purpose Technologies and Long-Term Economic Growth," OUP Catalogue, Oxford University Press, number 9780199290895.
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    Cited by:

    1. Damásio, Bruno & Nicolau, João, 2024. "Time inhomogeneous multivariate Markov chains: Detecting and testing multiple structural breaks occurring at unknown dates," Chaos, Solitons & Fractals, Elsevier, vol. 180(C).
    2. Ricardo Cabral & Francisco Louçã, 2019. "The euro at twenty: Follies of youth?," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 27, pages 59-69.
    3. Bruno Damásio & João Nicolau, 2020. "Time Inhomogeneous Multivariate Markov Chains: Detecting and Testing Multiple Structural Breaks Occurring at Unknown," Working Papers REM 2020/0136, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    4. Mendonça, Sandro & Damásio, Bruno & Charlita de Freitas, Luciano & Oliveira, Luís & Cichy, Marcin & Nicita, António, 2022. "The rise of 5G technologies and systems: A quantitative analysis of knowledge production," Telecommunications Policy, Elsevier, vol. 46(4).

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