Common Stochastic Trends, Common Cycles, and Asymmetry in Economic Fluctuations.International Finance Discussion Papers Number 681

摘要

This paper investigates the nature of business cycle asymmetry using a dynamicfactor 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.