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Asymmetry in the variance of economic activity: evidence for long-run UK GDP

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  • David Peel
  • Alan Speight

Abstract

The purpose is to document the significance of non-linearity in the conditional mean and variance of the long-run annual UK GDP growth rate. In particular, an examination is made of asymmetry in conditional variance with respect to past shocks which implies that the conditional variance is greater, and the conditional variance function steeper, following negative shocks to output growth. Simulations of the estimated model also suggest the potential for complex dynamics including substantial amplitude changes.

Suggested Citation

  • David Peel & Alan Speight, 1995. "Asymmetry in the variance of economic activity: evidence for long-run UK GDP," Applied Economics Letters, Taylor & Francis Journals, vol. 2(11), pages 415-418.
    • Handle: RePEc:taf:apeclt:v:2:y:1995:i:11:p:415-418
    DOI: 10.1080/135048595356961
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    References listed on IDEAS

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    1. Balke, Nathan S & Fomby, Thomas B, 1994. "Large Shocks, Small Shocks, and Economic Fluctuations: Outliers in Macroeconomic Time Series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(2), pages 181-200, April-Jun.
    2. Enrique Sentana, 1995. "Quadratic ARCH Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 639-661.
    3. Engle, Robert F & Ng, Victor K, 1993. "Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-1778, December.
    4. Granger, Clive W. J. & Terasvirta, Timo, 1993. "Modelling Non-Linear Economic Relationships," OUP Catalogue, Oxford University Press, number 9780198773207.
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    Cited by:

    1. Paul Beaumont & Stefan Norrbin & F. Pinar Yigit, 2007. "Time series evidence on the linkage between the volatility and growth of output," Applied Economics Letters, Taylor & Francis Journals, vol. 15(1), pages 45-48.

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