Business Cycles in Some Selected Oil Producing Countries: Iran versus Three OECD Members
Article Sidebar
Main Article Content
Abstract
This paper analyses the fluctuations of the business cycle in selected oil-producing countries of the Organization for Economic Co-operation and Development (OECD) and Iran during the period 1970:Q1–2015:Q4. We start by using a two-stage Hodrick–Prescott filtering process to extract a cyclical component of GDP, then the modified BBQ algorithm is used to identify the chronologies and some measures of business cycle characteristics, and finally the main features of business cycle fluctuations (persistence, volatility, asymmetry, and synchronization) are estimated. The results indicate the difference in the characteristics of business cycle fluctuations in countries with different levels of economic development. Both amplitude and severity of Iran as a developing country were high, and average duration of contraction was longer than expansion. As a result, asymmetries in both steepness and deepness are observed in Iran. Meanwhile, output persistence and volatility in Iran were above and below that of three OECD members’ average, respectively. The last part is based on the three indices for evaluating synchronization. Other findings reveal a high degree of synchronization between countries except Iran.
Article Details
The paper is published under CC BY-NC-ND, in which the article is freely downloaded and shared in its original form non-commercially and its citation details are identified.
References
Agénor, P. R, McDermott, C. J., & Prasad, E. S. (2000).Macroeconomic fluctuations in developing countries: Some stylized facts. World Bank Economic Review, 14(2), 251–285.
Aguiar, M. & Gopinath, G. (2007). Emerging market business cycles: The cycle is the trend. Journal of Political Economy, 115(1), 69–102.
Ajide, K. B. & Osode, O. E. (2017). Does FDI dampen or magnify output growth volatility in the ECOWAS region? African Development Review, 29(2), 211–222.
Bartmann, R. (2017). Causes and effects of 2008 financial crisis. Research report. Retrieved from HFU Business School, Internationale Betriebswirtschaft website: https://opus.hs-furtwangen.de/frontdoor/index/index/docId/1962
Baxter, M. & King, R. G. (1999). Measuring business cycles: Approximate band-pass filters for economic time series. The Review of Economics and Statistics, 81(4), 575–593.
Burns, A. F. & Mitchell, W. C. (1946). Measuring business cycles. New York: National Bureau of Economic Research.
Boroumand, S., Mohammadi, T., Pajooyan, J., & Memarnejad, A. (2019). The effect of exchange rate, oil prices and global inflation shocks on macroeconomic variables for the Iranian economy in the form of a DSGE Model. Iranian Economic Review, 23(4), 1057–1083.
Bry, G. & Boschan, C. (1971). Cyclical analysis of time series: Selected procedures and computer programs. New York: National Bureau of Economic Research.
Cashin, P. (2004). Caribbean business cycles (IMF Working Papers No. 04/136). Washington, DC: International Monetary Fund.
Canova, F. (1994). Detrending and turning points. European Economic Review, 38(3–4), 614–623.
Castro, V. (2010). The duration of economic expansions and recessions: More than duration dependence. Journal of Macroeconomics, 32(1), 347–365.
Chauvet, M. (2011). Real time analysis of the U.S. business cycle. Atlanta: Federal Reserve Bank of Atlanta.
Christiano, L. J. & Fitzgerald, T. J. (2003). The band pass filter. International Economic Review, 44(2), 435–465.
Craigwell, R. & Maurin, A. (2005). A comparative analysis of the United States and Barbados business cycles. Barbados: Central Bank of Barbados.
De Haan, J., Inklaar, R., & Jong-A-Pin, R. (2008). Will business cycles in the Euro area converge? A critical survey of empirical research. Journal of Economic Surveys, 22(2), 234–273.
Delavari, M., Mohammadali, H., Naderi, E. & Alikhani, N. G. (2011). The sources of Iran’s business cycles (MPRA Paper 46756). Munich: University Library of Munich.
Du Plessis, S. (2006). Business cycles in emerging market economies: A new view of the stylised facts (Working Paper No. 02/2006). South Africa: Stellenbosch University.
Einarsson, B. G., Emilsson, G., Haraldsdóttir, S. J., Pétursson, T. G. & Sveinsdóttir, R. B. (2013). On our own? The Icelandic business cycle in an international context (Economics Working paper No. 63). Reykjavík: Central Bank of Iceland.
Emami, K & Adibpour, M. (2012). Oil income shocks and economic growth in Iran. Economic Modeling, 29(5), 1774–1779.
Englund, P., Persson T., & Svensson, L. (1992). Swedish business cycles: 1861–1988. Journal of Monetary Economics, 30(3), 343–371.
Farzanegan, M. & Markwardt, G. (2009). The effects of oil price shocks on the Iranian economy. Energy Economics, 31(1), 134–151.
Gallegati, M., Gallegati, M., & Polasek, W. (2004). Business cycles’ fluctuations in Mediterranean countries. Emerging Markets Finance and Trade, 40(6), 28–47.
Hakura, D. S. (2009). Output volatility in emerging market and developing countries: What explains the “Great Moderation“ of 1970–2003? Czech Journal of Economics and Finance, 59(3), 229–254.
Harding, D., & Pagan, A. R. (1999). Knowing the cycle. (Melbourne Institute Working Paper Series No. 12/99). Melbourne: The University of Melbourne.
Harding, D. & Pagan A. R. (2002). Dissecting the cycle: A methodological investigation. Journal of Monetary Economics, 49(2), 365–381.
Hansen, G. D. & Prescott, E. C. (2005). Capacity constraints, asymmetries, and the business cycle. Review of Economic Dynamics, 8(4), 850–865.
Hodrick, R. J. & Prescott, E. C. (1997). Postwar U. S. business cycles: An empirical investigation. Journal of Money, Credit and Banking, 29(1), 1–16.
Kaihatsu, S., Koga, M., Tomoya, M., Sakata, & Hara, N. (2019). Interaction between business cycles and economic growth. Institute for Monetary and Economic Studies, Bank of Japan Monetary and Economic Studies, 37, 99–126.
Katkov, A. (2012). Great recession of 2008–2009: Causes and consequences, Journal of Applied Business and Economics, 13(3), 107–122.
Kydland, F. E. & Prescott, E. C. (1990). Business cycle facts: Real facts and a monetary myth. Federal Researve Bank of Minneapolis Quarterly Review, 14(2), 3–18.
Larsson, G. & Vasi, T. (2012). Comparison of detrending methods. (Unpublished doctoral dissertation). Department of Statistics, Uppsala University, Sweden.
Loayza, N., Ranciere, R., Serven, L. & Ventura, J. (2007). Macroeconomic volatility and welfare in developing countries: an introduction. The World Bank Economic Review, 21(3), 343–357.
Lucas, R. E. (1977) Understanding business cycles. Carnegie-Rochester Conference Series on Public Policy, 5(1), 7–29.
Madanizadeh, S. A, Karimirad, A. & Rahmati, M. (2019). Business cycle accounting of trade barriers in a small open economy. The Quarterly Review of Economics and Finance, 71(C), 67–78.
Male, R. (2010a). Developing country business cycles: Characterising the cycle (Working Paper No. 663). London: School of Economics and Finance, Queen Mary University of London.
Male, R. (2010b). Developing country business cycles: Revisiting the stylised facts (Working Paper No. 664). London: School of Economics and Finance, Queen Mary University of London.
Marcet, A. & Ravn, M. O. (2001). The HP-filter in cross-country comparisons (Economics Working Papers 588). Barcelona: Department of Economics and Business, Pompeu Fabra University.
Mink, M., Jacobs, J. & De Haan, J. (2007). Measuring synchronicity and co-movement of business cycles with an application on the Euro area (CESifo Working Paper Series No. 2112). Munich: CESifo Group.
Neumeyer, A., & Perri, F. (2005). Business cycles in emerging economies: The role of interest rates. Journal of Monetary Economics, 52(2), 345–80.
Ozbilgin, H. M. (2017). Forecasting the growth cycles of the Turkish economy (Working Papers No. 1715). Ankara: Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
Pallage, S. & Robe, M. A. (2001). Foreign aid and the business cycle. Review of International Economics, 9(4), 641–672.
Rand, J. & Tarp, F. (2002). Business cycles in developing countries: Are they different? World Development, 30(12), 2071–2088.
Shahnazi, R. & Afrasiabi, M. L. (2018). Effect of exogenous oil revenue shocks on reallocation of public and private investments in Iran. International Journal of Energy Economics and Policy, 8(1), 27–37.
Sichel, D. E. (1993). Business cycle asymmetry: A deeper look. Economic Inquiry, 31(2), 224–236.
Stock, J. H. & Watson, M. W. (1998). Business cycle fluctuations in US macroeconomic time series (NBER Working Paper No. 6528). Cambridge, MA: National Bureau of Economic Research.
Verick, S. & Islam, I. (2010). The great recession of 2008–2009: Causes, consequences and policy responses (IZA Discussion Paper No. 4934). Bonn: IZA Institute of Labor Economics.