Asymmetric persistence in GDP? A deeper look at depth |
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Authors: | Gregory D Hess Shigeru Iwata |
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Institution: | aFaculty of Economics and Politics, University of Cambridge, Sidgwick Avenue, Cambridge CB3 9DD, UK;bEconomics Department, University of Kansas, Lawrence, KS 66045, USA |
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Abstract: | If an economic time series behaves asymmetrically, then an interpretation of economic fluctuations based on linear time-series models could be misleading. Beaudry and Koop (1993) recently argued that for post-war US GDP data there exists a statistically significant difference in persistence between negative and positive shocks. We demonstrate that their test has two pitfalls: First, the t-statistic for testing asymmetry in persistence does not have a conventional interpretation. Second, a highly significant t-value may come from sources different from asymmetry. Using international data, we investigate for the presence of asymmetric persistence across the G-7 countries. |
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Keywords: | Business cycle asymmetries Non-standard distributions Random walk |
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