Business Cycle Asymmetry Research Articles

FREQUENCY-DOMAIN TEST OF TIME REVERSIBILITY

We introduce a frequency-domain test of time reversibility, the REVERSE test. It is based on the bispectrum. We analytically establish the asymptotic distribution of the test and also explore its finite-sample properties through Monte-Carlo simulation. Following other researchers who demonstrated that the problem of business-cycle asymmetry can be stated as whether macroeconomic fluctuations are time irreversible, we use the REVERSE test as a frequency-domain test of business-cycle asymmetry. Our empirical results show that time irreversibility is the rule rather than the exception for a representative set of macroeconomic time series for five OECD countries.

Characterizing Asymmetries in Business Cycles Using Smooth-Transition Structural Time-Series Models

This paper aims at testing and modeling business-cycle asymmetries within a structural time-series framework, allowing for smooth transition in the parameters characterizing the cyclical component, namely, the damping factor and the frequency. An LM test of linearity is derived, and illustrations are provided with reference to a set of quarterly U.S. industrial production series for two-digit manufacturing industries.

Un modello non lineare per la serie storica dell'indice della produzione industriale italiana

In this paper we intend to experiment Smooth Threshold Autoregressive model (STAR) in order to capture asymmetric business cycle in the time series of the industrial production index. First we obtain some evidence of non linearity by non parametric lag-regression, then we fit an ESTAR model using the Granger-Terasvirta's procedure. The results are better than the ones available from a linear model. In addition the graph of the transaction function tell us some interesting features on the changing regimes. In the paper we suggest also an informal way to easily obtain a STAR model for various asymmetries in business cycles.

The Current Depth-of-Recession and Unemployment-Rate Forecasts

Building upon Beaudry and Koop's (1993) analysis, we consider a "current depth of the recession" (CDR) variable in modeling the time-series behavior of the postwar quarterly U.S. unemployment rate. The CDR approach is consistent with the state-dependent behavior in the unemployment rate documented in the business-cycle asymmetry literature. We show that while the CDR effect is significant in-sample, no statistically significant out-of-sample forecast improvement is obtained relative to the linear alternative. Augmenting an AR(2) model by inclusion of the CDR term, however, does not significantly worsen the out-of-sample forecast performance.

Testing for business cycle asymmetry: some international evidence

This letter applies tests for asymmetric ‘deepness’ and ‘steepness’ to the monthly industrial production indices of 16 OECD economics and the OECD aggregate. We report evidence of statistically significant deepness for Germany, and both deepness and steepness for Japan, Sweden and, more marginally, the US. For Sweden, these asymmetries are consistent with sharp falls in production during recession, and gradual increases to high levels during recovery. For Japan and the US, these asymmetries are consistent with sharp falls in industrial production to low levels during recession and more gradual and moderate increases in production during recovery.

A threshold autoregressive analysis of stock returns and real economic activity

We find evidence of a pronounced threshold-type asymmetry in the relation between stock returns and real economic activity. Negative stock returns are followed by sharp decreases in industrial production growth rates, while only slight increases in real activity follow positive stock returns. These findings are consistent with the recent empirical macroeconomics literature on business cycle asymmetry.

Time Irreversibility and Business Cycle Asymmetry

The problem of business-cycle symmetry is addressed within the context of time reversibility. To this effect, the authors introduce a time domain test of time reversibility, the TR test. In an application, they show that time irreversibility is the rule rather than the exception for two well-known representative macroeconomic data sets. This shows that many components of the business cycle have asymmetric fluctuations. The characterization of asymmetry provided by the TR test shows that many series exhibit steepness asymmetry. A few series appear to be either deep or sharp. Copyright 1996 by Ohio State University Press.

Business cycle asymmetry and the stock market

We present and estimate models of an asymmetric relationship between CRSP stock index returns and the U.S. unemployment rate. Based on the Akaike Information Criterion, conventional linear time series models are improved by allowing asymmetric responses. Our results show that negative stock returns are quickly followed by sharp increases in unemployment, while more gradual unemployment declines follow positive stock returns. According to our forecasting model, the unemployment rate rises by 1.12 percentage points during the 12 months after a 10 percent stock decline. Because macroeconomic forecasters have been unable to reliably predict downturns, these findings may provide a useful contribution.

Business cycle asymmetries and non-linearities in U.K. macroeconomic time series

This paper empirically tests for and models non-linearities in a selection of U.K. macroeconomic time series. Attention is focused first on business cycle asymmetry, using Markov chain models to investigate whether cycles in macroeconomic time series display symmetric behaviour on both sides of a peak or trough. Next, a selection of statistical tests of non-linearity are employed to investigate formally the presence of departures from the linearity assumption. A variety of specific non-linear models of the business cycle that have been proposed recently are then fitted to ascertain how useful they are in explaining any non-linearities that have been observed in the series. Finally, the results are brought together in an extended discussion of their implications for business cycle research and policy analysis.

International Business Cycles and Long-Run Growth: An Analysis with Markov-Switching and Cointegration Methods

SummaryIn this article, we concern ourselves with the modelling of macroeconomic time series within the unit-roots framework. We apply two approaches which seem to be well suited to model business cycles and long-run growth phenomena. First, we apply the Markov-switching model which is built around the idea that a variable may be associated with different regimes. We extend this approach to allow for asymmetries in business cycles and find that with this modification the model identifies regimes which cannot be associated with notions of the business cycle. Second, in a cointegration analysis we examine common stochastic trends and international transmission of macroeconomic shocks. The results show that transient shocks do not vanish, but have long persistent effects. Furthermore, we supplement the cointegration approach with an impulse response analysis and find that there exists a transmission of shocks between countries which indicates great international dependencies in economic activity.

A Nonparametric Investigation of Duration Dependence in the American Business Cycle: A Note

Previous articleNext article No AccessConfirmations and ContradictionsA Nonparametric Investigation of Duration Dependence in the American Business Cycle: A NoteRam Mudambi, and Larry W. TaylorRam Mudambi Search for more articles by this author , and Larry W. Taylor Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Journal of Political Economy Volume 99, Number 3Jun., 1991 Article DOIhttps://doi.org/10.1086/261771 Views: 3Total views on this site Citations: 6Citations are reported from Crossref Copyright 1991 The University of ChicagoPDF download Crossref reports the following articles citing this article:Joe Cardinale, Larry W. Taylor Economic Cycles: Asymmetries, Persistence, and Synchronization, (Jan 2009): 308–348.https://doi.org/10.1057/9780230244405_7Jonathan Ohn, Larry W. Taylor, Adrian Pagan Testing for duration dependence in economic cycles, The Econometrics Journal 7, no.22 (Nov 2004): 528–549.https://doi.org/10.1111/j.1368-423X.2004.00142.xTerence C. Mills Business cycle asymmetry and duration dependence: An international perspective, Journal of Applied Statistics 28, no.66 (Aug 2001): 713–724.https://doi.org/10.1080/02664760120059246Christopher J. W. Zorn Modeling Duration Dependence, Political Analysis 8, no.44 (Jan 2017): 367–380.https://doi.org/10.1093/oxfordjournals.pan.a029821Ram Mudambi, Larry W. Taylor Some non-parametric tests for duration dependence: an application to UK business cycle data, Journal of Applied Statistics 22, no.11 (Jan 1995): 163–177.https://doi.org/10.1080/757584405K. Lahiri, J. G. Wang Predicting cyclical turning points with leading index in a markov switching model, Journal of Forecasting 13, no.33 (May 1994): 245–263.https://doi.org/10.1002/for.3980130302

Are Business Cycles Asymmetric? A Correction

Neftci (1984) proposed a nonparametric test procedure for determining whether business cycles are asymmetric in the sense that contractions are steeper than expansions. He found evidence of this type of asymmetry in postwar quarterly U.S. unemployment variables.' This comment identifies a probable error in Neftci's empirical work that reverses the significance of his results for the unemployment rate, and it suggests that this test may have low power and be sensitive to measurement error.

Measuring Business Cycle Time

The business cycle analysis of Arthur F. Burns and Wesley C. Mitchell and the National Bureau of Economic Research presumed that aggregate economic variables evolve on a time scale defined by business cycle turning points rather than by months or quarters. Do macroeconomic variables appear to evolve on an economic rather than a calendar time scale? Evidence presented here suggests that they do. However, the estimated economic time scales are only weakly related to business cycle time scales, providing evidence against the view underlying traditional business cycle analysis. Copyright 1987 by University of Chicago Press.

Real Wages over the Business Cycle: Evidence from Panel Data

One topic on which Keynes did not disagree with classical economists was the cyclical behavior of real wages. Keynes (1936) as well as various classical writers predicted that real wages should move countercyclically. Quoting the General Theory (p. 17): "in general an increase in employment can only occur through the accompaniment of a decline in real wages. Thus, I am not disputing this vital fact which the classical economists have (rightly) asserted as indefeasible." This prediction is based on the premise of competition and a given short-run capital stock. Increases in employment then correspond to more intensive use of capital and, through diminishing product, lower real wages. For this reason, evidence by Dunlop (1938) and Tarshis (1939) that real wages move procyclically was viewed as paradoxical. Both Dunlop and Tarshis based their findings on an observed positive correlation between real and money wages, which, given the procyclical movement of money wages, implies a positive correlation between