Reconsideration of the Markov Chain Evidence on Unemployment Rate Asymmetry
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Philip A Rothman
Using 15 years worth of additional data, a study is carried out to explore the extent to which the results in Rothman (1991) still hold. The analysis shows that such a comparison is very much dependent on whether: (i) 1-quarter differences or 4-quarter differences are used to construct the underlying state-indicator sequence; and (ii) the asymptotic distribution of the underlying test statistics is used for inference. The considerably higher staying probabilities obtained with the smoother 4-quarter differences argue in favor of their use in addressing the possible asymmetry of the business cycle, as opposed to higher-frequency fluctuations. Also, Monte Carlo simulations suggest the asymptotic p-values for the Markov chain tests are biased.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
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- Non-Linear Models: Where Do We Go Next - Time Varying Parameter Models?
- A Powerful Test for Linearity When the Order of Integration is Unknown
- Optimal Test for Markov Switching GARCH Models
- Bayesian Simultaneous Determination of Structural Breaks and Lag Lengths
- Is the Backward-Looking Component Important in a New Keynesian Phillips Curve?
- Reconsideration of the Markov Chain Evidence on Unemployment Rate Asymmetry
- Markov-Switching GARCH Modelling of Value-at-Risk
- Threshold Adjustment of Deviations from the Law of One Price
Articles in the same Issue
- Article
- Non-Linear Models: Where Do We Go Next - Time Varying Parameter Models?
- A Powerful Test for Linearity When the Order of Integration is Unknown
- Optimal Test for Markov Switching GARCH Models
- Bayesian Simultaneous Determination of Structural Breaks and Lag Lengths
- Is the Backward-Looking Component Important in a New Keynesian Phillips Curve?
- Reconsideration of the Markov Chain Evidence on Unemployment Rate Asymmetry
- Markov-Switching GARCH Modelling of Value-at-Risk
- Threshold Adjustment of Deviations from the Law of One Price
