This study dates business cycles in 10 European countries, the
United States, and Japan between 1925 and 1936. The aim is to
establish a consistent dating of the world economic crisis, which is a
precondition for understanding the sharp economic decline in many
countries during the interwar period.
Three approaches were applied that are common in business cycle
dating. First, a deskriptive analysis infers on recessions based on
the two-consecutive quarters approach often associated with the US
National Bureau of Economic Research. Second, the time series is
decomposed into trend and cycle using the Hodrick-Prescott (1980)
filter. The third approach is to use Markov-regime switching models,
which was proposed by Hamilton (1989) for such purposes.
The results of confirm that the Great Depression was a global
phenomenon, not limited to the US or Germany. Business cycle comovement
in the interwar period is at a level comparable to the post-
WWII period. This finding points at the contribution of international
business cycle integration to the course of the decline in single countries.
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