Palgrave Handbook of Econometrics: Applied Econometrics

336 Economic Cycles

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Life table Weibull

Figure 7.4 Downswings

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Life table Weibull

Figure 7.5 Upswings

Figures 7.4 and 7.5 present nonparametric plots of the hazard functions via the
life table method of Cutler and Ederer (1958). The hazard functions for both down-
swings and (especially) upswings can be characterized as NBU, or perhaps even the
more narrow classes, IFRA or IFR. The hazard function for upswings exhibits a
local peak at 15 months, dropping at 16 months, and ascending thereafter. The
rising hazard is consistent with the sharply rising hazard function for economic
contractions observed by Ohn, Taylor and Pagan (2004). The hazard function for
downswings exhibits strong IFR behavior with an upward trend, and this coincides
well with the nonparametric hazard function for economic expansions from Ohn,
Taylor and Pagan. For comparison, we also graph the parametric Weibull hazard