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On detrending and cyclical asymmetry
Author(s) -
Psaradakis Zacharias,
Sola Martin
Publication year - 2002
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.681
Subject(s) - business cycle , asymmetry , economics , component (thermodynamics) , econometrics , symmetry (geometry) , keynesian economics , mathematics , physics , thermodynamics , geometry , quantum mechanics
This paper considers the issue of testing for symmetry of the business cycle. It is demonstrated that findings of symmetry should be interpreted with caution since tests tend to have low power to detect asymmetries when applied to data that have been filtered to isolate their stationary business‐cycle component. This implies that asymmetries are likely to be detected in practice only when they are particularly prominent. An empirical application examines the properties of the cyclical component of real GDP for the G7 countries. Copyright © 2002 John Wiley & Sons, Ltd.