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Employment and business cycle asymmetries: a data based study

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  • Gerard A. Pfann

Abstract

Does the magnitude of a trough in employment differ from the magnitude of a peak in employment, and is the time employment spends in rising from a trough to a peak longer than the time spends in falling from a peak to a trough? In this paper we measure the “asymmetry of magnitudes” and the “asymmetry of durations” of seven US postwar employment series. The series are detrended using the Hodrick-Prescott filter prior to the analysis. Appropriate measurements of the two types of asymmetry are the skewness of the detrended series and the skewness of the first differenced detrended series, respectively. Monte Carlo and bootstrapping procedures are used to evaluate the significance levels. Five out of seven series show negative skewnesses in levels as well as in first differences. The skewnesses of “magnitudes” and “durations” of US aggregate employment are significant, and yield –0.50 and –0.60 respectively. ; In the second part of the paper a nonlinear AR model is derived from the theory of Hermitian type polynomials that have the potential to realize stochastic asymmetric self-sustained oscillations. In contrast with the standard linear AR model, the nonlinear AR model, fitted to the employment series, accurately generates the two types of asymmetry.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Discussion Paper / Institute for Empirical Macroeconomics with number 39.

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Date of creation: 1991
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Handle: RePEc:fip:fedmem:39

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Related research

Keywords: Business cycles ; Employment (Economic theory);

References

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  1. Falk, Barry, 1986. "Further Evidence on the Asymmetric Behavior of Economic Time Series over the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1096-1109, October.
  2. Neftci, Salih N, 1984. "Are Economic Time Series Asymmetric over the Business Cycle?," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 307-28, April.
  3. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
  4. Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report 27, Federal Reserve Bank of Minneapolis.
  5. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  6. Stock, James H, 1987. "Measuring Business Cycle Time," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1240-61, December.
  7. Stock, James H., 1987. "Measuring Business Cycle Time," Scholarly Articles 3425950, Harvard University Department of Economics.
  8. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 224-36, April.
  9. J. Bradford De Long & Lawrence H. Summers, 1986. "Are Business Cycles Symmetric?," NBER Working Papers 1444, National Bureau of Economic Research, Inc.
  10. Pfann, Gerald A. & Verspagen, Bart, 1989. "The structure of adjustment costs for labour in the Dutch manufacturing sector," Economics Letters, Elsevier, vol. 29(4), pages 365-371.
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Cited by:
  1. D. Jones & Maurice Peat & Max Stevenson, 1996. "Does the Process of Spatial Aggregation of U.K. Unemplyment Rate Series Serve to Induce or Remove Evidence of Asymmetry in the Business Cycle," Working Paper Series 67, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  2. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.

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