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A Note on Business Cycle Non-Linearity in U. S. Consumption

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Abstract

The recently examined durability-asymmetry hypothesis of Cook (1999) is re-evaluated using the diagnostic tests of time deformation proposed by Stock (1987, 1988). An : application of these tests to disaggregated data on U.S. consumersÂ’ expenditure provides : further support for this hypothesis, with the findings given an economic interpretation in : terms of variables evolving at differing speeds over different phases of the business cycle. : Additionally, building upon the studies of Cover (1992), Karras (1996) and Rhee and Rich : (1995), recent research by Arden et al. (2000) has shown the relaxation of the assumptions : of linearity and symmetry typically employed in macroeconometric models to result in : monetary policy having clear asymmetric effects on the economy. In particular it was shown : that expansionary monetary policy as given by a reduction in the interest rate, has greater : effects than contractionary policy (an increase in the interest rate), and that this becomes : more apparent when the economy is in recovery rather than recession. The finding of nonlinearity : in U.S. consumption therefore has major implications for econometric modelling : and policy analysis. :

Suggested Citation

  • Steven Cook, 2003. "A Note on Business Cycle Non-Linearity in U. S. Consumption," Journal of Applied Economics, Universidad del CEMA, vol. 6, pages 247-253, November.
    • Handle: RePEc:cem:jaecon:v:6:y:2003:n:2:p:247-253
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    References listed on IDEAS

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    1. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 224-236, April.
    2. Caballero, Ricardo J, 1993. "Durable Goods: An Explanation for Their Slow Adjustment," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 351-384, April.
    3. Richard Arden & Steve Cook & Sean Holly & Paul Turner, 2000. "The Asymmetric Effects of Monetary Policy: Some Results from a Macroeconometric Model," Manchester School, University of Manchester, vol. 68(4), pages 419-441, June.
    4. Stock, James H., 1987. "Measuring Business Cycle Time," Scholarly Articles 3425950, Harvard University Department of Economics.
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    6. Rhee, Wooheon & Rich, Robert W., 1995. "Inflation and the asymmetric effects of money on output fluctuations," Journal of Macroeconomics, Elsevier, vol. 17(4), pages 683-702.
    7. James Peery Cover, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1261-1282.
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    9. Douglas Gale, 1996. "Delay and Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 169-198.
    10. Stock, James H, 1987. "Measuring Business Cycle Time," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1240-1261, December.
    11. Steven Cook, 1999. "Cyclicality and Durability: Evidence from U.S. Consumers' Expenditure," Journal of Applied Economics, Taylor & Francis Journals, vol. 2(2), pages 299-310, November.
    12. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
    13. 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 307-328, April.
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    More about this item

    Keywords

    time deformation; asymmetry; non-linearity; consumersÂ’ expenditure :;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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