Duration Dependence, Monetary Policy Asymmetries, and the Business Cycle

28 Pages Posted: 28 Mar 2019

See all articles by Travis J. Berge

Travis J. Berge

Board of Governors of the Federal Reserve System

Damjan Pfajfar

Board of Governors of the Federal Reserve System

Date Written: 2019-03-25

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: Duration analysis, Business cycles, Hazard rates, Monetary policy asymmetries

JEL Classification: E32, C23, C25, E52

Suggested Citation

Berge, Travis J. and Pfajfar, Damjan, Duration Dependence, Monetary Policy Asymmetries, and the Business Cycle (2019-03-25). FEDS Working Paper No. 2019-020. Available at SSRN: https://ssrn.com/abstract=3361052 or http://dx.doi.org/10.17016/FEDS.2019.020

Travis J. Berge (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Damjan Pfajfar

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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