IDEAS home Printed from https://ideas.repec.org/p/gwi/wpaper/2008-03.html
   My bibliography  Save this paper

Asymmetry in the Business Model: Revisiting the Friedman Plucking Model

Author

Listed:
  • Tara Sinclair

    () (Department of Economics/Institute for International Economic Policy, George Washington University)

Abstract

Recent research suggests that unobserved components models can, under certain conditions, be estimated without imposing the common zero-correlation restriction between the permanent and transitory innovations. The impact of this restriction, however, has not previously been examined in an unobserved components model with asymmetric movements. This paper produces and estimates an unobserved components model that allows for both correlation between the innovations and asymmetric transitory movements. The asymmetry is modeled using Markov-switching in the transitory component, in the spirit of the Kim and Nelson (1999) version of the Friedman plucking model. The results reveal that U.S. real GDP can be decomposed into a permanent component, a symmetric transitory component, and an additional occasional asymmetric transitory shock. The innovations to the permanent component and the symmetric transitory component are significantly negatively correlated, but the asymmetric transitory shock is exogenous. The findings suggest that both permanent movements and asymmetric transitory shocks are important for explaining post-war output fluctuations in the U.S.

Suggested Citation

  • Tara Sinclair, 2008. "Asymmetry in the Business Model: Revisiting the Friedman Plucking Model," Working Papers 2008-03, The George Washington University, Institute for International Economic Policy.
  • Handle: RePEc:gwi:wpaper:2008-03
    as

    Download full text from publisher

    File URL: http://www.gwu.edu/~iiep/assets/docs/papers/Sinclair_IIEPWP2008-3.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Enzler, Jared J & Stekler, H O, 1971. "An Analysis of the 1968-69 Economic Forecasts," The Journal of Business, University of Chicago Press, vol. 44(3), pages 271-281, July.
    2. repec:ebl:ecbull:v:5:y:2003:i:3:p:1-9 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Asymmetry; Unobserved Components; Markov-Switching; Business Cycles;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gwi:wpaper:2008-03. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kyle Renner). General contact details of provider: http://edirc.repec.org/data/iigwuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.