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On Business Cycle Asymmetries in G7 Countries

  • Prasad Bidarkota

    ()

    (Department of Economics, Florida International University)

  • Khurshid M. Kiani

    (Department of Economics, Wilfrid Laurier University)

We investigate whether business cycle dynamics in seven industrialized countries (the G7) are characterized by asymmetries in conditional mean. We provide evidence on this issue using a variety of time series models. Our approach is fully parametric. Our testing strategy is robust to any conditional heteroskedasticity, outliers, and / or long memory that may be present. Our results indicate fairly strong evidence of nonlinearities in the conditional mean dynamics of the GDP growth rates for Canada, Germany, Italy, Japan, and the US. For France and the UK, the conditional mean dynamics appear to be largely linear. Our study shows that while the existence of conditional heteroskedasticity and long memory does not have much affect on testing for linearity in the conditional mean, accounting for outliers does reduce the evidence against linearity.

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File URL: http://casgroup.fiu.edu/pages/docs/2248/1280267803_03-08.pdf
File Function: First version, 2003
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Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0308.

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Length: 35 pages
Date of creation: Jul 2003
Date of revision:
Publication status: Published in Oxford Bulletin of Economics and Statistics, 66(3):333-351, (2004).
Handle: RePEc:fiu:wpaper:0308
Contact details of provider: Postal: Miami, FL 33199
Phone: (305) 348-2316
Fax: (305) 348-1524
Web page: http://casgroup.fiu.edu/Economics/

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