「Expansions Don't Die of Old Age」というブログエントリを先月28日にFrancis Dieboldが上げている

As the expansion ages, there's progressively more discussion of whether its advanced age makes it more likely to end. The answer is no. More formally, postwar U.S. expansion hazards are basically flat, in contrast to contraction hazards, which are sharply increasing. Of course the present expansion will eventually end, and it may even end soon, but its age it unrelated to its probability of ending.


[I blogged on flat expansion hazards before, but the message bears repeating as the expansion continues to age.]






Glenn Rudebusch has a very nice 2016 FRBSF Letter, "Will the Economic Recovery Die of Old Age?". He draws on perspective and results from our joint work of 25 years ago (including a paper we did with Dan Sichel -- see below), and he applies them to the present expansion. He correctly emphasizes that U.S. expansion hazard functions are basically flat, so "old" expansions are no more likely to end than "young" ones. That's of some comfort, since the present expansion, which started in mid-2009, is getting long in the tooth!

Actually, the flat expansion hazard is only for post-WWII expansions; the prewar expansion hazard is sharply increasing. Here's how they compare (copied from Glenn's FRBSFLetter):

Perhaps the massive difference is due to "good policy", that is, post-war policy success in "keeping expansions alive". Or perhaps it's just "good luck" -- but it's so big and systematic that luck alone seems an unlikely explanation.

For more on all this, and to see the equally-fascinating and very different results for recession hazards, see Diebold, Rudebusch and Sichel (1992), which I consider to be the best statement of our work in the area.







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