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Assessing the time intervals between economic recessions

Author

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  • Cláudio Tadeu Cristino
  • Piotr Żebrowski
  • Matthias Wildemeersch

Abstract

Economic recessions occur with varying duration and intensity and may entail substantial losses in terms of GDP, employment, household income, and investment spending. In this work, we propose a statistical model for the time intervals between recessions that accounts for the state of the economy and the impact of market adjustments and regulatory changes. The model uses a generalized renewal process based on the Gumbel distribution (GuGRP) in which times between consecutive events are conditionally independent. We also present a novel goodness of fit test tailored to the GuGRP that validates the use of the statistical model for the analysis of recessions. Analyzing recessions in the U.S. and Europe, we demonstrate that the statistical model characterizes well recession inter-arrival times and that the model performs better than simpler, commonly used distributions. In addition, the presented statistical model enables us to compare the adjustment processes in different economies and to forecast the occurrence of future recessions.

Suggested Citation

  • Cláudio Tadeu Cristino & Piotr Żebrowski & Matthias Wildemeersch, 2020. "Assessing the time intervals between economic recessions," PLOS ONE, Public Library of Science, vol. 15(5), pages 1-20, May.
    • Handle: RePEc:plo:pone00:0232615
    DOI: 10.1371/journal.pone.0232615
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    References listed on IDEAS

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    1. Beutner, Eric, 2023. "A review of effective age models and associated non- and semiparametric methods," Econometrics and Statistics, Elsevier, vol. 28(C), pages 105-119.

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