Is Business Cycle Asymmetry Intrinsic in Industrialized Economies?

Morley, James and Panovska, Irina (2019) Is Business Cycle Asymmetry Intrinsic in Industrialized Economies? Macroeconomic Dynamics. ISSN 1365-1005

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Abstract

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:
https://www.cambridge.org/core/journals/macroeconomic-dynamics/article/is-business-cycle-asymmetry-intrinsic-in-industrialized-economies/223E72D606F28AB8BC94CB1EAB145B1C The final, definitive version of this article has been published in the Journal, Macroeconomic Dynamics, ??, ?, pp ?-? 2019, © 2019 Cambridge University Press.
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
138330
Deposited By:
Deposited On:
31 Oct 2019 12:05
Refereed?:
Yes
Published?:
Published
Last Modified:
22 Sep 2020 04:20