On Business Cycle Asymmetries in G7 Countries

Khurshid Kiani and Prasad V. Bidarkota ()

Oxford Bulletin of Economics and Statistics, 2004, vol. 66, issue 3, pages 333-351

Abstract: We investigate whether business cycle dynamics in seven industrialized countries (the G7) are characterized by asymmetries in conditional mean. We provide evidence on this issue using a variety of time series models. Our approach is fully parametric. Our testing strategy is robust to any conditional heteroskedasticity, outliers, and/or long memory that may be present. Our results indicate fairly strong evidence of nonlinearities in the conditional mean dynamics of the GDP growth rates for Canada, Germany, Italy, Japan, and the US. For France and the UK, the conditional mean dynamics appear to be largely linear. Our study shows that while the existence of conditional heteroskedasticity and long memory does not have much effect on testing for linearity in the conditional mean, accounting for outliers does reduce the evidence against linearity. Copyright 2004 Blackwell Publishing Ltd.

Date: 2004
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