The changing economic regimes and expected time to recover of the peripheral countries under the euro

A nonparametric approach

Bruno Damásio, Francisco Louçã, João Nicolau

Research output: Contribution to journalArticle

Abstract

A nonparametric method is presented in order to estimate the expected time to cross a threshold on the basis of two assumptions, a Markovian property and stationarity. An empirical application is provided, using this method to investigate the dynamics of the GDP of 16 countries of the European Union for a long period, 1962–2016, and to detect the patterns of growth rates and expected mean reversion time after a negative, i.e a recession, or a positive deviation from the trend. The conclusion supports the hypothesis of an economic regime change in the eurozone, affecting in particular the peripheral countries of southern Europe, ignited by the creation of the common currency.

Original languageEnglish
Pages (from-to)524-533
Number of pages10
JournalPhysica A: Statistical Mechanics and its Applications
Volume507
DOIs
Publication statusPublished - 1 Oct 2018

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economics
Economics
Mean Reversion
recession
European Union
Currency
Nonparametric Methods
Stationarity
Union
Deviation
deviation
trends
thresholds
estimates
Estimate
Trends

Keywords

  • Economic divergence
  • Economic regime change
  • Expected hitting times
  • Markov chain

Cite this

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The changing economic regimes and expected time to recover of the peripheral countries under the euro : A nonparametric approach. / Damásio, Bruno; Louçã, Francisco; Nicolau, João.

In: Physica A: Statistical Mechanics and its Applications, Vol. 507, 01.10.2018, p. 524-533.

Research output: Contribution to journalArticle

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