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Time-Varying Effects of Skewness: An International Comparison

Author

Listed:
  • Jiawen Luo

    (School of Business Administration, South China University of Technology, Guangzhou 510640, China)

  • Jingyi Deng

    (School of Business Administration, South China University of Technology, Guangzhou 510640, China)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Oguzhan Cepni

    (Ostim Technical University, Ankara, Turkiye; University of Edinburgh Business School, Centre for Business, Climate Change, and Sustainability; Department of Economics, Copenhagen Business School, Denmark)

Abstract

This paper provides a comparative, time-varying assessment of how macroeconomic skewness affects the business cycle in the US, Canada, and the UK. We construct novel aggregate skewness factors for Canada and the UK, alongside a US benchmark, and embed these indicators in country-specific time-varying parameter VAR models with stochastic volatility. Our results show that negative skewness shocks consistently depress output and equity prices, raise unemployment, and trigger monetary easing, while generating generally modest disinflationary effects. Crucially, the macroeconomic transmission of skewness is highly state-dependent: responses are markedly larger and more persistent during major downturns, particularly the global financial crisis and the COVID-19 episode, while remaining muted during tranquil expansions.

Suggested Citation

  • Jiawen Luo & Jingyi Deng & Rangan Gupta & Oguzhan Cepni, 2026. "Time-Varying Effects of Skewness: An International Comparison," Working Papers 202602, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202602
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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