Testing for Duration Dependence in Cycles in Economic Data

We discuss several tests for duration dependence, and establish a few theoretical relationships among the tests that we examine. Some of our test statistics are new to the econometrics literature, and we make an important distinction between the discrete and continuous time frameworks. We then test for duration dependence in business and stock-market cycles, and compare our results for business cycles with those of Diebold and Rudebusch (1990,1991). Our null hypothesis is that once an expansion or contraction has exceeded some minimum duration, the probability of a turning point is independent of its age – a proposition that dates back to Fisher (1925) and McCulloch(1975). Address correspondence to: Larry Taylor College of Business and Economics Rauch Business Center, 37 621 Taylor Street Lehigh University Bethlehem, PA 18015-3117