IDEAS home Printed from https://ideas.repec.org/p/pes/wpaper/2017no48.html
   My bibliography  Save this paper

Testing European Business cycles asymmetry

Author

Listed:
  • Zlatko J. Kovacic

    () (The Open Polytechnic of New Zealand, New Zealand)

  • Milos Vilotic

    () (My Statistical Consultant Ltd.)

Abstract

One of business cycles stylised facts is that contractions are shorter than expansions, but less persistent, more volatile and therefore asymmetric. Investigating existence and type of business cycles asymmetry is important for analysis of economic policy and statistical modeling. Economic implication of business cycles asymmetry is that economic policy should be different in period of contractions than expansion. Statistical implication is that linear models of business cycles cannot capture this stylised fact. The article has two objectives: extend the literature on the business cycles asymmetry by testing data from 36 European countries including countries never been analysed before and test robustness of the results to extraction methods and asymmetry tests used. Quarterly GDP series from Eurostat database covering period 2000q1-2016q3 were used. Series were prepared by removing seasonal component using X13-ARIMA procedure. To assess robustness of asymmetry tests results to alternative methods of detrending business cycles were extracted using two filters: Corbae-Ouliaris ideal band filter and double Hodrick-Prescott filter. For testing the deepness and steepness asymmetry three tests were used: Mills, Mira and Sichel tests. Weaker evidence of deepness asymmetry was found in Cyprus, Montenegro and Turkey cycles where all three tests statistics for both filters have negative sign. However, only for one of the tests in each country the result was statistically significant. For two other countries, Germany and Sweden, four of six tests indicated deepness asymmetry, but only one of these tests results was statistically significant. Most of the cycles show steepness asymmetry, with exception of Ireland business cycles and to certain extent cycles of Poland, Malta, Montenegro and Spain.

Suggested Citation

  • Zlatko J. Kovacic & Milos Vilotic, 2017. "Testing European Business cycles asymmetry," Working Papers 48/2017, Institute of Economic Research, revised May 2017.
  • Handle: RePEc:pes:wpaper:2017:no48
    as

    Download full text from publisher

    File URL: http://www.badania-gospodarcze.pl/images/Working_Papers/2017_No_48.pdf
    File Function: First version, 2017
    Download Restriction: no

    More about this item

    Keywords

    business cycle; asymmetry; Mills test; Mira test; Sichel test;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pes:wpaper:2017:no48. 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: (Adam P. Balcerzak). General contact details of provider: http://edirc.repec.org/data/ibgtopl.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.

    We have no references for this item. You can help adding them by using 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.