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A short note on business cycles of underground output: are they asymmetric?

  • Yoke-Kee Eng


    (Universiti Tunku Abdul Rahman)

  • Chin-Yoong Wong


    (Universiti Tunku Abdul Rahman)

This short note as the first study investigates the symmetry of fluctuations of underground output around trend for four selected Southeast Asian countries, that is, Malaysia, Indonesia, Thailand, and Philippines, over the time horizon of 1970-2006. In particular, we test if the underground output falls below trend more drastically and severely at shorter time span than when rising above trend. We find no evidence that supports this hypothesis. We thus conclude that asymmetry in fluctuations around trend is not a primary concern in understanding the nature of underground economy. We suggest that the symmetry of fluctuation of underground output, in conjunction with the potential complementary effect on market consumption, may account for the widely documented expansionary fiscal contraction in developing countries.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2008)
Issue (Month): 58 ()
Pages: 1-10

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Handle: RePEc:ebl:ecbull:eb-08c20049
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  1. 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.
  2. Bruno Chiarini & Elisabetta Marzano, 2006. "Market Consumption and Hidden Consumption: A Test for Substitutability," Discussion Papers 12_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  3. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  4. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
  5. 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.
  6. Sichel, Daniel E, 1993. "Business Cycle Asymmetry: A Deeper Look," Economic Inquiry, Western Economic Association International, vol. 31(2), pages 224-36, April.
  7. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
  8. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1, July.
  9. Khurshid Kiani, 2005. "Detecting Business Cycle Asymmetries Using Artificial Neural Networks and Time Series Models," Computational Economics, Society for Computational Economics, vol. 26(1), pages 65-89, August.
  10. 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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