Reconsideration of the Markov Chain Evidence on Unemployment Rate Asymmetry
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.
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Volume (Year): 12 (2008)
Issue (Month): 3 (September)
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References listed on IDEAS
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- 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.
- Rothman, Philip, 1988. "Further Evidence On The Asymmetric Behavior Of Unemployment Rates Over The Business Cycle," Working Papers 88-23, C.V. Starr Center for Applied Economics, New York University.
- Falk, Barry L., 1986.
"Further Evidence on the Asymmetric Behavior of Economic Time Series over the Business Cycle,"
Staff General Research Papers Archive
11097, Iowa State University, Department of Economics.
- 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.
- 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.
- Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1, Enero.
- 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.
- 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.
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