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Essays on the nonlinearity of business cycles, cointegration and structural change
xiii, 118 leaves : illustrations ; 28 cm.
Economic fluctuation is one of the most important concerns to macroeconoimsts and policymakers. We have studied the international similarities and differences of business cycles, with particular emphasis on nonlinearities and asymmetries in response to expansions and recessions. The industrial production indices of advanced countries (US and Japan) and rapidly developing countries (Korea, Taiwan, Singapore) all show nordinearity. Further, most show asymmetries in their business cycles with respect to expansion and recession. We have studied the international transmission mechanism between two large countries (US and Japan) and three smaller economies (Korea, Taiwan, and Singapore) using bivariate STAR and CDR models. We found that a large country either imposes the nonlinear characteristics of its business cycle onto that of a small country (Korea) or influences it significantly (Taiwan and Singapore). hi the comparison of CDR and STAR models, we found that (i) within sample, the CDR model fits the data slightly better than the STAR model; (11) the CDR model forecasts better than the STAR model; and (111) the CDR model forecasts somewhat better than the linear model, while the STAR model forecasts somewhat worse than the linear model. Thus we conclude that the CDR model deserves equal consideration with the STAR model as a nonlinear model for business cycle variables. We perform-n the cointegration tests for the trivarite model of real monetary aggregates, real personal income, and short-ten-n interest rate. We find the existence of a long-run relationship among these three variables. In order to check the stability of money demand functions, we implement Quintos' (I 993) rank constancy test and traditional stability tests such as CUSUM and CUSUMQ tests. The test results show that real MI is fairly stable and structural change occurred during the 1970s and early 1980s, which is consistent with both Hoffman and Rasche (1995) and more traditional money demand research. We found that real MI is more stable than other monetary aggregates.
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Includes bibliographical references: pages 108-115.