Time-Varying Effects of Skewness: An International Comparison

Jiawen Luo (), Jingyi Deng (), Rangan Gupta and Oguzhan Cepni
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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

No 202602, Working Papers from University of Pretoria, Department of Economics

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.

Keywords: Skewness; Business Cycle; Time-Varying Vector Autoregressions (search for similar items in EconPapers)
JEL-codes: C32 C36 E32 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2026-02
New Economics Papers: this item is included in nep-ets
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