On Business Cycle Asymmetries in G7 Countries
| Date | 01 July 2004 |
| DOI | http://doi.org/10.1111/j.1468-0084.2004.00082.x |
| Author | Prasad V. Bidarkota,Khurshid M. Kiani |
| Published date | 01 July 2004 |
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On Business Cycle Asymmetries
in G7 Countries
Khurshid M. Kiani* and Prasad V. Bidarkota
*Department of Economics, Wilfrid Laurier University, Waterloo, Ontario, Canada
(e-mail: kkiani@wlu.ca)
Department of Economics, Florida International University, Miami, FL, USA
(e-mail: bidarkot@fiu.edu)
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.
I. Introduction
The possible existence of asymmetries in economic fluctuations is being tested
extensively using aggregate macroeconomic data. While studies such as those
of Neftci (1984), Brunner (1992, 1997), Beaudry and Koop (1993), Potter
(1995), and Ramsey and Rothman (1996) conclude that there are significant
asymmetries, others (DeLong and Summers, 1986; Falk, 1986; Sichel, 1989;
JEL Classification numbers: B22, B23, C32, E32.
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 66, 3 (2004) 0305-9049
333
Blackwell Publishing Ltd, 2004. Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK
and 350 Main Street, Malden, MA 02148, USA.
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