Statistical Modeling of Duration Dependence in Business Cycles Using a Modulated Power Law Process
42 Pages Posted: 4 May 2005
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Statistical Modeling of Duration Dependence in Business Cycles Using a Modulated Power Law Process
Statistical Modeling of Duration Dependence in Business Cycles Using a Modulated Power Law Process
Date Written: November 2004
Abstract
Applying the modulated power law process, a generalized model which is a compromise between a renewal process and a nonhomogeneous Poisson process, we find the presence of positive duration dependence in all samples, although the magnitudes vary from sample to sample. A goodness-of-fit test rejects the renewal process assumption which was used in many previous studies, and suggests that a more general model such as the modulated power law process is needed.
Keywords: Weibull process, renewal process, maximum likelihood estimation, buinsess cycle
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