Macroeconomics

Quantum mechanics

Monetary policy

Business cycle

Interest rate

Economics

Computer science

Potential output

Thermodynamics

Physics

Recession

Database

Econometrics

Unemployment

Measure (data warehouse)

Sample (material)

Unemployment rate

Output gap

Asymmetry

Phillips curve

Macroeconomic Dynamics

We consider a model-averaged forecast-based estimate of the output gap to measure economic slack in 10 industrialized economies. Our measure takes changes in the long-run growth rate into account and, by addressing model uncertainty using equal weights on different forecast-based estimates, is robust to different assumptions about the underlying structure of the economy. For all 10 countries in the sample, we find that the estimated output gap has much larger negative movements during recessions than positive movements in expansions, suggesting business cycle asymmetry is an intrinsic characteristic of industrialized economies. Furthermore, the estimated output gap is always strongly negatively correlated with future output growth and unemployment and positively correlated with capacity utilization. It also implies a convex Phillips Curve in many cases. The model-averaged output gap is reliable in real time in the sense of being subject to relatively small revisions.

IS BUSINESS CYCLE ASYMMETRY INTRINSIC IN INDUSTRIALIZED ECONOMIES?