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Business cycle asymmetries: characterisation and testing based on Markov-switching autoregressions
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Clements, Michael P. and Krolzig, Hans-Martin (1998) Business cycle asymmetries: characterisation and testing based on Markov-switching autoregressions. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.522).
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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
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) | ||||
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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 | ||||
Official Date: | 8 December 1998 | ||||
Dates: |
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Number: | No.522 | ||||
Number of Pages: | 24 | ||||
Status: | Not Peer Reviewed | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Funder: | Economic and Social Research Council (Great Britain) (ESRC) | ||||
Grant number: | L116251015 (ESRC) |
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