Working Paper

Duration Dependence, Monetary Policy Asymmetries, and the Business Cycle

Abstract: We produce business cycle chronologies for U.S. states and evaluate the factors that change the probability of moving from one phase to another. We find strong evidence for positive duration dependence in all business cycle phases but find that the effect is modest relative to other state- and national-level factors. Monetary policy shocks also have a strong influence on the transition probabilities in a highly asymmetric way. The effect of policy shocks depends on the current state of the cycle as well as the sign and size of the shock.

Keywords: Hazard rates; Duration analysis; Business cycles; Monetary policy asymmetries;

JEL Classification: E52; E32; C25; C23;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2019-03-25

Number: 2019-020

Pages: 26 pages