Business Cycle Asymmetries: International Evidence

Razzak, Weshah

doi:10.1006/redy.2000.0109

Cited by 53 publications

(47 citation statements)

References 7 publications

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“…displaying a cycle whose dips are steeper than the previous or subsequent climb up periods, and deeper respective to the trend than the booms stand above it. This behavior is consistent with the findings of Neftçi (1984), Sichel (1993), Ramsey and Rothman (1996), Verbrugge (1997) or Razzak (2001), who conclude that business cycles present "deepness" (i.e. recessions tend to fall deeper than expansions are tall respective to the trend) and "steepness" (i.e.…”

Section: Timesupporting

confidence: 91%

Predicting the Unpredictable: Forecastable Bubbles and Business Cycles under Rational Expectations

Gracia¹

2012

Economics

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A popular interpretation of the Rational Expectations/Efficient Markets hypothesis states that, if it holds, market valuations must follow a random walk; hence, the hypothesis is frequently criticized on the basis of empirical evidence against such a prediction. Yet this reasoning incurs what we could call the 'fallacy of probability diffusion symmetry': although market efficiency does indeed imply that the mean (i.e. 'expected') path must rule out any cyclical or otherwise arbitrage-enabling pattern, if the probability diffusion process is asymmetric the observed path will most closely resemble not the mean but the median, which is not subject to this condition. In this context, this paper develops an efficient markets model where the median path of Tobin's q ratio displays regular, periodic cycles of bubbles and crashes reflecting an agency problem between investors and producers. The model is tested against U.S. market data, and its results suggest that such a regular cycle does indeed exist and is statistically significant. The aggregate production model in Gracia (Uncertainty and Capacity Constraints: Reconsidering the Aggregate Production Function, 2011) is then put forward to show how financial fluctuations can drive the business cycle by periodically impacting aggregate productivity and, as a consequence, GDP growth. JEL E22, E23, E32, G12, G14

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Section: Timesupporting

confidence: 91%

Predicting the Unpredictable: Forecastable Bubbles and Business Cycles under Rational Expectations

Gracia¹

2012

Economics

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“…displaying a cycle with falls that are steeper than the previous or subsequent climb up periods, and deeper respective to the trend than the booms stand above it. This behavior is consistent with the findings of Neftçi (1984), Sichel (1993), Ramsey & Rothman (1996), Verbrugge (1997) or Razzak (2001), who conclude that business cycles present "deepness" (i.e. recessions tend to fall deeper than expansions are tall respective to the trend) and "steepness" (i.e.…”

Section: Considerations On Aggregate Productivity Impactsupporting

confidence: 91%

On the Power and Weakness of Rational Expectations: Logical Fallacies, Periodic Bubbles and Business Cycles

Gracia

2012

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract A popular interpretation of the Rational Expectations/Efficient Markets hypothesis states that, if the hypothesis holds, then market valuations must follow a random walk. This postulate has frequently been criticized on the basis of empirical evidence. Yet the assertion itself incurs what we could call 'fallacy of probability diffusion symmetry': although market efficiency does indeed imply that the mean (i.e. 'expected') path must be a random walk, if the probability diffusion process is asymmetric then the observed path will most closely resemble not the mean but the median, which does not necessarily follow a random walk. Terms of use: Documents inTo illustrate the implications, this paper develops an efficient markets model where the median path of Tobin's q ratio displays regular cycles of bubbles and crashes reflecting an agency problem between investors and producers. The model is tested against U.S. market data, with results suggesting that such a regular cycle does indeed exist and is statistically significant. The aggregate production function in Gracia (Uncertainty and Capacity Constraints: Reconsidering the Aggregate Production Function, 2011) is then put forward to show how financial fluctuations can drive the business cycle by periodically impacting aggregate productivity and, as a consequence, GDP growth.JEL E22, E23, E32, G12, G14

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“…See Hodrick and Prescott (1997). Apart from the protagonists themselves, Christodoulakis et al (1995), Razzak (2001) as well as Artis (2003), amongst many others, refer to the Hodrick Prescott-filter. We set the smoothing parameter to λ = 1600, as recommended for quarterly data, apply it to ln Y and refer to the de-logged filtered series as Y*.…”

Section: An Indicator For Cyclical Developmentmentioning

confidence: 99%

International Business Cycles: How Do They Relate to Switzerland?

Graff

2011

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper first discusses concepts, definitions and theoretical explanations for international business cycles. This is followed by an overview of previous empirical studies. We then argue that for ex post analyses the output gap is a univariate quantification of the business cycle that is comparable across space and time and readily available (or rather computable from GFP series), which recommends its use for our purposes. Based on an unbalanced panel of quarterly output gap series in a panel of 40 countries from 1960q1 to 2011q3, we then test a number of hypotheses regarding the imbeddedness of the Swiss economy into international business cycles and possible changes thereof over the recent years. The results identify layers of international business cycles, where the integration of Switzerland is pronounced. Moreover it markedly deepened after 1994. A case for Switzerland being 'special' can hence not be made in terms of its recent business cycle pattern.

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Business Cycle Asymmetries: International Evidence

Cited by 53 publications

References 7 publications

Predicting the Unpredictable: Forecastable Bubbles and Business Cycles under Rational Expectations

Predicting the Unpredictable: Forecastable Bubbles and Business Cycles under Rational Expectations

On the Power and Weakness of Rational Expectations: Logical Fallacies, Periodic Bubbles and Business Cycles

International Business Cycles: How Do They Relate to Switzerland?

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