My scenario is:*
Workflow A - configured to start when a new item is created in List A: Creates a new list item in List B.
Workflow B - configured to start when a new item is created in List B: Creates a new list item in List A.
When I test this i get the following:
I manually create a list item in List A.
Workflow A fires and creates a new list item in List B.
Workflow B fires and creates a new list item in List A.
But a new instance of Workflow A does not instantiate on the created in List by Workflow B.
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I am aware this is causes an infinite loop there is a pause for duration action set to 1 year in workflow A. So it fires in yearly cycles.
I know sp2 prevents infinite loops being created on the same list but from what i read of the article below suggests this is possible to do cross lists as in my scenario. Link
The answer was co-recursive workflows do not work cross lists as I assummed. The msdn blog link above scenario uses two workflows on the same list. I adjusted my workflows to use the same list.
The error was output to my log files but since logging was not set to verbose i didn't see it.