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49. Do Euro Area Expansions Die of Old Age? (jún 2018)

Are euro area economic expansions more likely to enter a recession as they endure longer? The present analysis empirically addresses this question by applying a Survival Analysis toolkit onto 12 euro area economies’ growth cycle data starting in 1951. The key finding is that the risk of experiencing a recession stays essentially the same, as economic expansions age. More specifically, the hazard of a euro area economy experiencing a recession is fundamentally constant in time over the period 1 to 22 years. This finding stands at odds with colloquial speak that the current economic upturn is overdue for a recession because of its duration. In addition, we find that the depth of preceding recessions do not affect the durations of subsequent economic expansions. In the face of the latter finding, future research should focus on covariate-driven approach to growth cycles to identify other factors which affect euro area recession incidence over time.