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Can oil shocks explain asymmetries in the US Business Cycle?

Author

Listed:
  • Hans-Martin Krolzig

    (Oxford University, Department of Economics, Manor Road Building, Oxford, OX1 3UQ and Nuffield College)

  • Michael P. Clements

    (University of Warwick, Dept. of Economics, CV4 7AL Coventry, U.K.)

Abstract

We consider whether oil prices can account for business cycle asymmetries. We test for asymmetries based on the Markov switching autoregressive model popularized by Hamilton (1989), using the tests devised by Clements and Krolzig (2000). We find evidence against the conventional wisdom that recessions are more violent than expansions: while some part of the downturn in economic activity that characterises recessionary periods can be attributed to dramatic changes in the price of oil, post-War US economic growth is characterized by the steepness of expansions.

Suggested Citation

  • Hans-Martin Krolzig & Michael P. Clements, 2002. "Can oil shocks explain asymmetries in the US Business Cycle?," Empirical Economics, Springer, vol. 27(2), pages 185-204.
    • Handle: RePEc:spr:empeco:v:27:y:2002:i:2:p:185-204
    Note: Received: December 2000/Final Version Received: September 2001
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    More about this item

    Keywords

    Oil prices; Business cycle asymmetries; Markov-switching models;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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