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Ossama Mikhail
''Trading Business-Cycle Depth for Duration using an economy-specific characteristic''
( 2006, Vol. 5 No.7 )
Regarding the trade-off between the depth and the duration of recessions, there exists a mounting empirical evidence of the idiosyncratic and non-synchronized behavior of the business cycle over time within and across countries. To account for the trade-off, a model is presented wherein an economy-specific parameter does control the magnitude, severity and persistence of the business cycle without the need to add an asymmetric functional form [that captures the propagation mechanism] to the model. The model results show that as much as half of a percentage point of GDP in depth and a relative difference of three years duration can be attributed to this parameter. The model implies a two-dimensional depth-duration space wherein we place the [average] depth-duration expansion and contraction for the U.S.
Keywords: Business Cycles Depth
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
B4 - Economic Methodology: General
Manuscript Received : May 11 2006 Manuscript Accepted : May 11 2006

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