IDENTIFYING BUSINESS CYCLE ASYMMETRIES BY NONLINEAR DYNAMICS

Abstract

Evidence suggests that macroeconomic variables do not behave in the same manner during different phases of a country business cycle. The aim of the present work is to find potential mathematical explanation for asymmetric behavior of the business cycle by making use of nonlinear dynamic economics. Nonlinear models, even if they are difficult to conceive, help better explaining asymmetries. I examine autoregressive models, Markov Switching autoregressive models, asymmetric time series, models with learning asymmetries, and endogenous business cycle models. Focusing on the mathematical structure of business cycles, I endogenously incorporate asymmetries in a mathematical model using difference and differential equations.