Friedman’s Plucking Model: New International Evidence From Maddison Project Data
7 Pages Posted:
Date Written: November 19, 2020
Milton Friedman’s plucking model of business cycles hypothesizes that deeper recessions forecast larger booms while stronger booms do not necessarily forecast deeper recessions. While most previous past empirical work is limited to post-war data in the US, this paper tests the plucking model using Maddison Project growth data for 169 countries across several centuries. We find that the plucking principle is broadly evident across time and countries, particularly in East Asia, Europe and North America while to a lesser extent elsewhere.
Keywords: Markov Chains, Recessions, International Business Cycles
JEL Classification: E17, E32, E37, F43, F44
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