Friedman’s Plucking Model: New International Evidence From Maddison Project Data

Abstract

Abstract Milton Friedman’s plucking model of business cycles hypothesizes that deeper recessions forecast larger booms while stronger booms do not necessarily forecast deeper recessions. While most previous past empirical work is limited to post-war data in the US, this paper tests the plucking model using Maddison Project growth data for 169 countries across several centuries. We find that the plucking property is broadly evident across time and countries. Plucking is particularly strong in advanced economies in East Asia (Japan), Europe (Western Europe) and North America (US and Canada) while to a lesser extent elsewhere in emerging economies. The overall strength of the plucking property globally also appears to have increased during the 20th century with the rise of widespread industrialized economies.