Abstract

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.

Recommended Citation

Philip A. Rothman (2008) "Reconsideration of the Markov Chain Evidence on Unemployment Rate Asymmetry", Studies in Nonlinear Dynamics & Econometrics: Vol. 12: No. 3, Article 6.
http://www.bepress.com/snde/vol12/iss3/art6

Related Files

rothman_data.zip (27 kB)
Data