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Reconsideration of the Markov Chain Evidence on Unemployment Rate Asymmetry

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  • Rothman Philip A

    () (East Carolina University)

Abstract

Using 15 years worth of additional data, a study is carried out to explore the extent to which the results in Rothman (1991) still hold. The analysis shows that such a comparison is very much dependent on whether: (i) 1-quarter differences or 4-quarter differences are used to construct the underlying state-indicator sequence; and (ii) the asymptotic distribution of the underlying test statistics is used for inference. The considerably higher staying probabilities obtained with the smoother 4-quarter differences argue in favor of their use in addressing the possible asymmetry of the business cycle, as opposed to higher-frequency fluctuations. Also, Monte Carlo simulations suggest the asymptotic p-values for the Markov chain tests are biased.

Suggested Citation

  • Rothman Philip A, 2008. "Reconsideration of the Markov Chain Evidence on Unemployment Rate Asymmetry," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 12(3), pages 1-18, September.
  • Handle: RePEc:bpj:sndecm:v:12:y:2008:i:3:n:6
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    References listed on IDEAS

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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. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1.
    3. Rothman, Philip, 1991. "Further evidence on the asymmetric behavior of unemployment rates over the business cycle," Journal of Macroeconomics, Elsevier, vol. 13(2), pages 291-298.
    4. 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 357-384, March.
    5. Sichel, Daniel E, 1989. "Are Business Cycles Asymmetric? A Correction," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1255-1260, October.
    6. Wesley Clair Mitchell, 1927. "Introductory pages to "Business Cycles: The Problem and Its Setting"," NBER Chapters,in: Business Cycles: The Problem and Its Setting, pages -23 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Yoon, Gawon, 2009. "It's all the miners' fault: On the nonlinearity in U.S. unemployment rates," Economic Modelling, Elsevier, vol. 26(6), pages 1449-1454, November.
    2. Oleg Korenok & Bruce Mizrach, 2004. "The Microeconomics of Macroeconomic Asymmetries: Sectoral Driving Forces and Firm Level Characteristics," Computing in Economics and Finance 2004 266, Society for Computational Economics.
    3. Miguel Artiach, 2011. "Second-order moments of frequency asymmetric cycles," Working Papers. Serie AD 2011-27, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Luke Hartigan, 2016. "Testing for Symmetry in Weakly Dependent Time Series," Discussion Papers 2016-18, School of Economics, The University of New South Wales.

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