Common Stochastic Trends, Common Cycles, and Asymmetry in Economic Fluctuations
By Chang-Jin Kim, Jeremy Piger. 2002
109 citations recorded by the source corpus.
This paper investigates the nature of business cycle asymmetry using a dynamic factor model of output, investment, and consumption. We first identify a common stochastic trend and a common transitory component by embedding the permanent income hypothesis within a simple growth model. We then investigate two types of asymmetry commonly identified in U.S. business cycle dynamics: (1) Infrequent negative permanent shocks, modeled as shifts in the growth rate of the common stochastic trend and (2) infrequent negative transitory shocks, modeled as "plucking" deviations from the common stochastic trend. Tests of marginal significance suggest both types of asymmetry were present in post-war recessions, although the shifts in trend are less severe than the received literature suggests.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/4b9a88dc8f611326c41fd958e8d1765a99caf88a
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In Economics and Econometrics
Citations in the corpus
- Recessionary Shocks and Regional Employment: Evidence on the Resilience of U.K. Regions (2012, unknown): “Much of the recent research into the “plucking model” has been concerned with devising econometric methods to test for the existence and extent of this asymmetry (see e.g., Kim and Nelson, 1999; Kim and Piger, 2002; Sinclair, 2008).”
- Tracking the new economy: using growth theory to detect changes in trend productivity (2007, methodology): “Kim and Piger (2002) equate the permanent component of output to consumption of nondurables and services, which is much more cyclical and volatile than our permanent component. Kim, Piger, and Startz (2002) estimate a common permanent component for output and consumption, with regime-switching, and ”