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

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

2004-03-04

arxiv.org/abs/cond-mat/0403143v1

Physica A 339 (2004) 548-558

Physics

Condensed Matter

Statistical Mechanics

8 pages, 9 figures, submitted to Physica A

Scientific paper

10.1016/j.physa.2004.03.005

Following findings by Ormerod and Mounfield, Wright rises the problem whether a power or an exponential law describes the distribution of occurrences of economic recession periods. In order to clarify the controversy a different set of GDP data is 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.

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