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A test of symmetry based on L-moments with an application to the business cycles of the G7 economies

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  • Bastianin, Andrea
  • Manera, Matteo

Abstract

We study the performance of tests of distributional symmetry based on the coefficient of skewness and on L-moments and present a bootstrap implementation of such tests that is suitable in time series applications. We show with Monte Carlo simulations that both tests are correctly sized – provided that their null distribution is approximated with the bootstrap – and that the procedure based on L-moments has more power than that based on the conventional coefficient of skewness. An empirical application analyses the symmetry of business cycles for the G7 countries implementing tests of symmetry as tools to investigate time reversibility.

Suggested Citation

  • Bastianin, Andrea & Manera, Matteo, 2021. "A test of symmetry based on L-moments with an application to the business cycles of the G7 economies," Economics Letters, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:ecolet:v:198:y:2021:i:c:s0165176520304225
    DOI: 10.1016/j.econlet.2020.109662
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    References listed on IDEAS

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    1. Kilian, Lutz & Demiroglu, Ufuk, 2000. "Residual-Based Tests for Normality in Autoregressions: Asymptotic Theory and Simulation Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 40-50, January.
    2. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1.
    3. Andrea Bastianin, 2020. "Robust measures of skewness and kurtosis for macroeconomic and financial time series," Applied Economics, Taylor & Francis Journals, vol. 52(7), pages 637-670, February.
    4. Fong, Wai Mun, 2003. "Time reversibility tests of volume-volatility dynamics for stock returns," Economics Letters, Elsevier, vol. 81(1), pages 39-45, October.
    5. Beare, Brendan K. & Seo, Juwon, 2014. "Time Irreversible Copula-Based Markov Models," Econometric Theory, Cambridge University Press, vol. 30(5), pages 923-960, October.
    6. Ardian Harri & Keith H. Coble, 2011. "Normality testing: two new tests using L-moments," Journal of Applied Statistics, Taylor & Francis Journals, vol. 38(7), pages 1369-1379, May.
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    More about this item

    Keywords

    Business cycle; L-moments; Symmetry; Skewness; Time reversibility;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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