Asymmetries in Business Cycles: Econometric Techniques and Empirical Evidence

Abstract

Recent empirical studies suggest that a number of economic time series cannot be viewed as the output of a linear, Gaussian process. These findings are compatible with earlier claims by (1927), (1936), and (1950) that the nature of economic activities varies over the different stages of a business cycle. Specifically, these authors observed that expansions are more persistent but less sharp than recessions. The presence of asymmetries in business cycles would have important theoretical and practical implications. For examples, economic theories would have to explain such asymmetries. Similarly, models used for forecasting or policy-analysis purposes should reflect asymmetric properties.