The Application of Frailty Models in Investigating the Factors Affecting the Risk of Recurrence of Recession: Experience of Iran and Selected Countries

Exploring the causes and factors creating the business cycles has been of interest to researchers in the field of economics for a long time, and many research based on various methods have been conducted in this field. The current research seeks to analyze the factors affecting the risk of recession recurrence in Iran and some sanctioned countries. Recession is assumed to be a recurrent disease, and the factors affecting its recurrence risk are investigated. For this purpose, frailty models defined under the parametric methods of survival analysis are used. The annual data of the 11 sanctioned countries considered in the period of 1990-2018 are received and their recession periods are determined using the Hadrick-Prescott filter. Then, by using a parametric model with a frailty component, the effect of inflation, ratio of fixed capital formation to government final consumption expenditures, oil prices and sanctions on the risk of recession recurrence is investigated. The results show that the effect of the variables on the risk of recession recurrence is not significant. Therefore, it can be concluded that according to the conditions of these countries, unknown and sometimes non-economic factors affect the risk of recession recurrence.