Is Business Cycle Asymmetry Intrinsic in Industrialized Economies?

Morley, James and Panovska, Irina (2020) Is Business Cycle Asymmetry Intrinsic in Industrialized Economies? Macroeconomic Dynamics, 24 (6). pp. 1403-1436. ISSN 1365-1005

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We consider a model-averaged forecast-based estimate of the output gap to measure economic slack in ten industrialized economies. Our measure takes changes in the long-run growth rate into account and, by addressing model uncertainty using equal weights on different forecast-based estimates, is robust to different assumptions about the underlying structure of the economy. For all ten countries in the sample, we find that the estimated output gap has much larger negative movements during recessions than positive movements in expansions, suggesting business cycle asymmetry is an intrinsic characteristic of industrialized economies. Furthermore, the estimated output gap is always strongly negatively correlated with future output growth and unemployment and positively correlated with capacity utilization. It also implies a convex Phillips Curve in many cases. The model-averaged output gap is reliable in real time in the sense of being subject to relatively small revisions.

Item Type:
Journal Article
Journal or Publication Title:
Macroeconomic Dynamics
Additional Information: The final, definitive version of this article has been published in the Journal, Macroeconomic Dynamics, 24, 6, pp 1403-1436, 2019, © 2019 Cambridge University Press.
Uncontrolled Keywords:
?? output gapmodel averagingmarkov switchingbusiness cycle asymmetryconvex phillips curveeconomics and econometricse32e37 ??
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Deposited On:
31 Oct 2019 12:05
Last Modified:
28 Jun 2024 01:13