Business Cycle Asymmetries : Characterisation and Testing based on Markov-Switching Autoregressions

@inproceedings{Clements1998BusinessCA,
  title={Business Cycle Asymmetries : Characterisation and Testing based on Markov-Switching Autoregressions},
  author={Michael P. Clements},
  year={1998}
}
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… CONTINUE READING
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