Business Cycle Asymmetries

Michael P. Clements · Hans‐Martin Krolzig

148 citations0/0 files storedJournal of Business and Economic Statistics

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Monetary Policy and Economic Impact Economic Theory and Policy Unemployment and Economic Growth

Abstract

Tests for business cycle asymmetries are developed for Markov-switching autoregressive models. The tests of deepness, steepness, and sharpness are Wald statistics, which have standard asymptotics. For the standard two-regime model of expansions and contractions, deepness is shown to imply sharpness (and vice versa), whereas the process is always nonsteep. Two and three-state models of U.S. GNP growth are used to illustrate the approach, along with models of U.S. investment and consumption growth. The robustness of the tests to model misspecification, and the effects of regime-dependent heteroscedasticity, are investigated.

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References

1989A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle 1996Impulse response analysis in nonlinear multivariate models 1988Testing Linearity Against Smooth Transition Autoregressive Models 1984Are Economic Time Series Asymmetric over the Business Cycle?1992Characterizing nonlinearities in business cycles using smooth transition autoregressive models 1994Business-Cycle Phases and Their Transitional Dynamics 1996Stock market volatility and the business cycle 1997Markov-Switching Vector Autoregressions: Modelling, Statistical Inference, and Application to Business Cycle Analysis

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