Business Cycle Asymmetries: Characterisation and Testing based on Markov-Switching Autoregressions
Michael Clements and
No 269248, Economic Research Papers from University of Warwick - Department of Economics
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 nonsteep. 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 nonparametric tests.
Keywords: Institutional and Behavioral Economics; Research Methods/ Statistical Methods (search for similar items in EconPapers)
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Journal Article: Business Cycle Asymmetries: Characterization and Testing Based on Markov-Switching Autoregressions (2003)
Working Paper: Business Cycle Asymmetries: Characterisationand Testing Based on Markov-Switching Autoregression (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269248
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