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Testing for business cycle asymmetries based on autoregressions with a Markov-switching intercept

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  • Knüppel, Malte

Abstract

In this paper, we investigate the implications of the two concepts of asymmetry defined by Sichel (1993) - deepness and steepness - for first-order autoregressive processes with a Markov-switching intercept. In order to do so, we derive the two required formulas determining the coefficient of skewness of first-order autoregressive processes with a Markov-switching intercept and the coefficient of skewness of the first differences of these processes. For the special case of two states, we present the parameter restrictions leading to non-deepness and non-steepness. We show that these restrictions imply that the conclusions of Clements & Krolzig (2003) with respect to asymmetries of processes with a Markov-switching intercept are not correct. Finally, we apply the results to U.S. GDP which is found to exhibit strongly significant deepness and steepness. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2004,41.

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Date of creation: 2004
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Handle: RePEc:zbw:bubdp1:2919

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Related research

Keywords: asymmetry; deepness; steepness; Markov-switching; business cycles;

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References

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  1. Martin Sola & Zacharias Psaradakis, 2002. "On Detrending and Cyclical Asymmetry," Department of Economics Working Papers, Universidad Torcuato Di Tella 020, Universidad Torcuato Di Tella.
  2. Michael P. Clements & Hans-Martin Krolzig, 1998. "A comparison of the forecast performance of Markov-switching and threshold autoregressive models of US GNP," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 1(Conferenc), pages C47-C75.
  3. 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.
  4. Hans-Martin Krolzig & Michael Clements, 2000. "Business Cycle Asymmetries: Characterisation and Testing based on Markov-Switching Autoregressions," Economics Series Working Papers, University of Oxford, Department of Economics 2000-W32, University of Oxford, Department of Economics.
  5. Daniel E. Sichel, 1989. "Business cycle asymmetry: a deeper look," Working Paper Series / Economic Activity Section, Board of Governors of the Federal Reserve System (U.S.) 93, Board of Governors of the Federal Reserve System (U.S.).
  6. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 357-84, March.
  7. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers, C.E.P.R. Discussion Papers 782, C.E.P.R. Discussion Papers.
  8. 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.
  9. Hamilton, James D., 1996. "Specification testing in Markov-switching time-series models," Journal of Econometrics, Elsevier, Elsevier, vol. 70(1), pages 127-157, January.
  10. McQueen, Grant & Thorley, Steven, 1993. "Asymmetric business cycle turning points," Journal of Monetary Economics, Elsevier, Elsevier, vol. 31(3), pages 341-362, June.
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Cited by:
  1. Narayan, Paresh Kumar & Popp, Stephan, 2009. "Investigating business cycle asymmetry for the G7 countries: Evidence from over a century of data," International Review of Economics & Finance, Elsevier, Elsevier, vol. 18(4), pages 583-591, October.
  2. Frédérick Demers & Ryan Macdonald, 2007. "The Canadian Business Cycle: A Comparison of Models," Working Papers, Bank of Canada 07-38, Bank of Canada.

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