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The variance of economic activity over the business cycle: some further evidence

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  • D. A. Peel
  • A. E. H. Speight

Abstract

This letter tests for the presence of non-linearities in UK and US industrial and sectoral production growth rates using a joint model of bilinearity inconditional mean and generalized-autoregressive-conditional heteroscedasticity, the latter augmented by lagged production growth rates so as to allow consideration of variance asymmetry with respect to the phase of the business cycle. We find bilinearity inconditional mean to be present in US industrial production and manufacturing, and significant conditional variance asymmetries in the majority of series considered such that conditional variance is higher during recessions and stronger in the more cyclically sensitive durable consumer goods sectors.

Suggested Citation

  • D. A. Peel & A. E. H. Speight, 1998. "The variance of economic activity over the business cycle: some further evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 5(11), pages 669-673.
  • Handle: RePEc:taf:apeclt:v:5:y:1998:i:11:p:669-673 DOI: 10.1080/135048598354096
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
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    3. Durlauf, Steven N & Johnson, Paul A, 1995. "Multiple Regimes and Cross-Country Growth Behaviour," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 365-384, Oct.-Dec..
    4. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
    5. Jan Fagerberg & Bart Verspagen, 1996. "Heading for Divergence? Regional Growth in Europe Reconsidered," Journal of Common Market Studies, Wiley Blackwell, vol. 34(3), pages 431-448, September.
    6. Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-348, November.
    7. Helmut Hofer & Andreas Worgotter, 1997. "Regional Per Capita Income Convergence in Austria," Regional Studies, Taylor & Francis Journals, vol. 31(1), pages 1-12.
    8. Gudgin, Graham, 1995. "Regional Problems and Policy in the UK," Oxford Review of Economic Policy, Oxford University Press, vol. 11(2), pages 18-63, Summer.
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