Asymmetries in Business Cycles and the Role of Oil Prices
(2017) , 32 pages
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- Abstract
- We estimate asymmetries in innovations to Solow residuals for eleven OECD countries using Stochastic Frontier Analysis. Likelihood ratio statistics and vari- ance ratios imply that all countries with net energy imports have significant nega- tive asymmetries, while other countries do not. We construct a simple theoretical model in which the measured Solow residual combines effects from technology, factor utilization, and the terms of trade. For oil importers, the model implies an asym- metric response of measured TFP to oil price increases and decreases. When we condition Solow residuals separately on positive and negative oil price changes to al- low asymmetric responses, evidence for remaining negative asymmetric innovations to the Solow residuals vanishes for all countries except Switzerland. Switzerland’s relatively dominant financial sector suggests that their asymmetries could be due to a financial crisis, a hypothesis that we test and fail to reject.
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Citations
Daniel, B., Hafner, C., Manner, H., & Simar, L. (2017). Asymmetries in Business Cycles and the Role of Oil Prices (ISBA Discussion Paper 2017/10). https://hdl.handle.net/2078.5/178409