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On Detrending and Cyclical Asymmetry

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Author Info
Martin Sola ()
Zacharias Psaradakis

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Abstract

This paper considers the issue of testing for symmetry of the business cycle. It is demonstrated that findings of symmetry should be interpreted with caution since tests tend to have low power to detect asymmetries when applied to data that have been filtered to isolate their stationary business-cycle component. This implies that asymmetries are likely to be detected in practice only when they are particularly prominent. An empirical application examines the properties of the cyclical component of real GDP from the G7 countries.

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Paper provided by Universidad Torcuato Di Tella in its series Department of Economics Working Papers with number 020.

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Length: 21 pages
Date of creation: Apr 2002
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Handle: RePEc:udt:wpecon:020

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Acemoglu, Daron & Scott, Andrew, 1997. "Asymmetric business cycles: Theory and time-series evidence," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 501-533, December. [Downloadable!] (restricted)
    Other versions:
  3. repec:bep:sndecm:3:1999:4:203-220 is not listed on IDEAS
  4. Ramsey, James B & Rothman, Philip, 1996. "Time Irreversibility and Business Cycle Asymmetry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 1-21, February. [Downloadable!] (restricted)
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  5. Chistiano, Lawrence J & den Haan, Wouter J, 1996. "Small-Sample Properties of GMM for Business-Cycle Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 309-27, July.
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  6. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278. [Downloadable!] (restricted)
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  7. Speight, A E H & McMillan, D G, 1998. "Testing for Asymmetries in UK Macroeconomic Time Series," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(2), pages 158-70, May. [Downloadable!] (restricted)
  8. Canova, Fabio, 1998. "Detrending and business cycle facts," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 475-512, May. [Downloadable!] (restricted)
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  9. 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. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
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  11. King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231. [Downloadable!] (restricted)
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  12. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November. [Downloadable!] (restricted)
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  13. Martin Chalkley & In Ho Lee, 1998. "Learning and Asymmetric Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 623-645, July. [Downloadable!] (restricted)
  14. Andrews, Donald W K & Monahan, J Christopher, 1992. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 60(4), pages 953-66, July. [Downloadable!] (restricted)
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  15. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July. [Downloadable!] (restricted)
  16. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March. [Downloadable!] (restricted)
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  17. Newbold, Paul, 1990. "Precise and efficient computation of the Beveridge-Nelson decomposition of economic time series," Journal of Monetary Economics, Elsevier, vol. 26(3), pages 453-457, December. [Downloadable!] (restricted)
  18. Westlund, Anders H & Ohlen, Sven, 1991. "On Testing for Symmetry in Business Cycles," Empirical Economics, Springer, vol. 16(4), pages 479-502.
  19. Beaudry, Paul & Koop, Gary, 1993. "Do recessions permanently change output?," Journal of Monetary Economics, Elsevier, vol. 31(2), pages 149-163, April. [Downloadable!] (restricted)
  20. McQueen, Grant & Thorley, Steven, 1993. "Asymmetric business cycle turning points," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 341-362, June. [Downloadable!] (restricted)
  21. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Oxford University Press, vol. 31(2), pages 224-36, April.
  22. Ghysels, Eric & Granger, Clive W J & Siklos, Pierre L, 1996. "Is Seasonal Adjustment a Linear or Nonlinear Data-Filtering Process?," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 374-86, July.
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  23. Ravn, M.O. & Uhlig, H., 1997. "On adjusting the hp-filter for the frequency of observations," Discussion Paper 50, Tilburg University, Center for Economic Research. [Downloadable!]
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  24. W.A. Razzak, 2001. "Business Cycle Asymmetries: International Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 230-243, January. [Downloadable!] (restricted)
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  25. Giles, David E A, 1997. "Testing for Asymmetry in the Measured and Underground Business Cycles in New Zealand," The Economic Record, The Economic Society of Australia, vol. 73(222), pages 225-32, September.
  26. Chen, Yi-Ting & Chou, Ray Y. & Kuan, Chung-Ming, 2000. "Testing time reversibility without moment restrictions," Journal of Econometrics, Elsevier, vol. 95(1), pages 199-218, March. [Downloadable!] (restricted)
  27. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November. [Downloadable!] (restricted)
  28. J. Bradford De Long & Lawrence H. Summers, 1986. "Are Business Cycles Symmetric?," NBER Working Papers 1444, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Knüppel, Malte, 2004. "Testing for business cycle asymmetries based on autoregressions with a Markov-switching intercept," Discussion Paper Series 1: Economic Studies 2004,41, Deutsche Bundesbank, Research Centre. [Downloadable!]
  2. Steven Cook & Alan Speight, 2006. "Time deformation in UK consumers’ expenditure: an empirical analysis of highly disaggregated data," Applied Economics Letters, Taylor and Francis Journals, vol. 13(8), pages 471-478, June. [Downloadable!] (restricted)
  3. A. Pagan & J. Engel & D. Haugh, 2004. "Some Methods for Assessing the Need for Non-linear Models in Business Cycle Analysis and Forecasting," Econometric Society 2004 Australasian Meetings 284, Econometric Society. [Downloadable!]
  4. David E. Giles & Chad N. Stroomer, 2004. "Identifying the Cycle of a Macroeconomic Time-Series Using Fuzzy Filtering," Econometrics Working Papers 0406, Department of Economics, University of Victoria. [Downloadable!]
  5. Steven Cook & Alan Speight, 2005. "A deeper look at asymmetries in UK consumers’ expenditure: the nonparametric analysis of 100 disaggregates," Applied Economics, Taylor and Francis Journals, vol. 37(8), pages 893-900, May. [Downloadable!] (restricted)
  6. Cook, S., 2004. "On the Detection of Business Cycles Asymmetry in 22 Countries, 1870-1994," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(1). [Downloadable!]
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