Clements, Michael P. and Krolzig, Hans-Martin, 1964- (1998) Business cycle asymmetries: characterisation and testing based on Markov-switching autoregressions. Working Paper. University of Warwick, Department of Economics, Coventry.

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Abstract

We propose testing for business cycle asymmetries in Markov-switching autoregressive (MS-AR) models. We derive the parametric restrictions on MS-AR models that rule out types of asymmetries such as deepness, steepness, and sharpness, and set out a testing procedure based on Wald statistics which have standard asymptotics. For a two-regime model, such as that popularised by Hamilton (1989), we show that deepness implies sharpness (and vice versa) while the process is always non-steep. We illustrate with two and three-state MS models of US GNP growth, and with models of US output and employment. Our findings are compared with those obtained from standard non-parametric tests.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HF Commerce
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Business cycles, Information asymmetry, Markov processes, Autoregression (Statistics)
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	8 December 1998
Number:	No.522
Number of Pages:	24
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Economic and Social Research Council (Great Britain) (ESRC)
Grant number:	L116251015 (ESRC)
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URI:	http://wrap.warwick.ac.uk/id/eprint/1652

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