further evidence on business cycle asymmetries in g7 countries this paper tests for business cycle symmetry in g7 countries during the post world war ii period using a number of tests each reflecting alternative definitions of business cycle asymmetry the tests are applied to monthly coincident economic indicators of business cycles this found that business cycles in the us are characterized by both longitudinal deepness and transversal steepness and sharpness asymmetries further it is found that asymmetric transition probabilties and time irreversibility are due to nonlinearities on the contrary business cycles in germany exhibits a symmetric behaviour between these extremes are the other countries for which at least one of the tests here considered rejects the null of cyclical symmetry particularly business cycle is characterized by deepness and sharpness in canada asymmetry in persistence in france and japan and asymmetric transition probabilities in france and united kingdom

factor demand models with nonlinear short run fluctuations abstract this paper considers asymmetric costs of adjustment that propagate nonlinear shortrun fluctuations in stochastic factor demand systems the model endogenously generates asymmetric cyclical demand for capital and labour between peaks and troughs of the business cycle the empirical analysis of the model is based on quarterly time series data of the dutch manufacturing sector for the period 1971 i 1984 iv and annual time series data of the u k manufacturing sector for the period 1955 1986 i find important differences of adjustment speed of capital and labour inputs between expansionary and contractionary phases of the business cycle

escape dynamics in learning models this article illustrates and characterizes how adaptive learning can lead to recurrent large fluctuations learning models have typically focused on the convergence of beliefs towards an equilibrium however in stochastic environments there may be rare but recurrent episodes where shocks cause beliefs to escape from the equilibrium generating large movements in observed outcomes i characterize the escape dynamics by drawing on the theory of large deviations developing new results which make this theory directly applicable in a class of learning models the likelihood frequency and most likely direction of escapes are all characterized by a deterministic control problem i illustrate my results with two simple examples

heterogeneous expectations adaptive learning and evolutionary dynamics this paper presents a linear self referential macroeconomic model with the possibility of multiple equilibria where agents have the choice of using one of two forecasting models one of minimum state variable form and the other of sunspot form to form expectations of current and future prices endogenous predictor selection is modeled as an evolutionary game where individuals choose among the forecasting models based on relative performance some nash solutions are not relevant as they are not stable under evolutionary or adaptive learning finally it is shown that the sunspot equilibrium is fragile against temporary shocks to information costs

stability properties for learning with heterogeneous expectations and multiple equilibria the bounded rationality literature has studied heterogeneous learning rules under models with a single equilibrium this paper examines learning with heterogeneous expectations in a simple macroeconomic model with multiple equilibria stability properties of this model are determined by the distribution of heterogeneity these results differ greatly from those which impose homogenous expectations a priori when the level of heterogeneity is allowed to vary stability conditions become more restrictive due to the stationarity requirements of the simpler more parsimonious updating rule finally i find that the two equilibria exchange stability when the mse of using this simpler updating rule is minimized

public versus private sector procurement ethics and strategy what each sector can learn from the other the government purchasing market constitutes the largest business sector in the world while marketers would benefit from a deep understanding of both sectors how the two sectors differ in terms of ethics and strategy largely remains unknown the purpose of this research therefore is to explore differences between the for profit and not for profit sectors on two critical aspects of business to business procurement ethics and strategy using survey data from a sample of 328 procurement professionals in the for profit and not for profit sectors key differences are explored findings suggest that buyers in the for profit sector are more likely to behave opportunistically conversely the buyers leaders in the not for profit sector behave more opportunistically and are more willing to turn a blind eye to their subordinate buyers opportunistic behaviors in addition key differences in procurement strategy are unveiled suggesting that not for profit procurement practices have some room for improvement based on the findings theoretical and managerial implications are drawn and a future research agenda is proposed

behavioural heterogeneity under evolutionary pressure macroeconomic implications of costly optimisation a model is developed in which a continuum of agents makes interdependent output decisions in a stochastic environment characterised by strategic complementarity two groups are distinguished naive agents follow a costless adaptive expectations rule while sophisticated agents incur an optimisation cost to achieve self fulfilling expectations the paper studies the dynamics generated as the population composition evolves under pressure of differential payoffs sophisticated agents are favoured if optimisation is cheap or the stochastic environment highly variable but naive agents generally persist a higher long run share of sophisticated agents is associated with greater output variability and low output persistence several attempts have been made in the recent macroeconomic literature to explore the implications of allowing for behavioural heterogeneity among economic agents typically the standard postulates of unbounded rationality are held to apply only to a subset of the population while the remainder is assumed to behave in accordance with some alternative specification the nature of which depends on the situation being analysed akerlof and yellen

replicator dynamics in a cobweb model with rationally heterogeneous expectations abstract this paper extends the adaptively rational equilibrium dynamics of brock and hommes brock w a hommes c h 1997 a rational route to randomness econometrica 65 1059 1160 by introducing a generalized version of the replicator dynamic the replicator equilibrium dynamics red couples the price dynamics of a cobweb model with predictor selection governed by an evolutionary replicator dynamic we show that the red supports the conclusion of sethi and franke sethi r franke r 1995 behavioural heterogeneity under evolutionary pressure macroeconomic implications of costly optimisation the economic journal 105 583 600 that costly rational beliefs persist though unlike them these results obtain in the deterministic case numerical evidence shows that complex dynamics exist as in brock and hommes even though no weight is placed on strictly dominated predictors in an red steady state

is the business cycle characterized by deterministic chaos abstract tests are conducted on u s macroeconomic data for the presence of low dimensional deterministic chaos where deterministic chaos is defined as in grandmont s 1985 walras bowley lecture or in brock 1986 the idea is to test for evidence of endogenous instability causing the business cycle low order autoregressions are hard to reject with our methods evidence of chaos is weak but our tests may be too weak to detect it evidence of nonlinearity is present in employment 1950 i to 1983 iv unemployment 1949 i to 1982 iv monthly post war industrial production and pig iron production 1877 1937

intrinsic heterogeneity in expectation formation we introduce the concept of misspecification equilibrium to dynamic macroeconomics agents choose between a list of misspecified econometric models and base their selection on relative forecast performance a misspecification equilibrium is a stochastic process in which agents forecast optimally given their choices with forecast model parameters and predictor proportions endogenously determined under appropriate conditions the misspecification equilibrium will exhibit intrinsic heterogeneity in which all predictors are used at all times even in the neoclassical limit in which only the most successful predictors are used this equilibrium is attainable under least squares learning and dynamic predictor selection based on average profits

are business cycles asymmetric a correction neftci 1984 proposed a nonparametric test procedure for determining whether business cycles are asymmetric in the sense that contractions are steeper than expansions he found evidence of this type of asymmetry in postwar quarterly u s unemployment variables this comment identifies a probable error in neftci s empirical work that reverses the significance of his results for the unemployment rate and it suggests that this test may have low power and be sensitive to measurement error

learning asymmetries in real business cycles when a boom ends the downturn is generally sharp and short when growth resumes the boom is more gradual our explanation rests on learning about productivity when agents believe productivity is high they work invest and produce more more production generates higher precision information when the boom ends precise estimates of the slowdown prompt decisive reactions investment and labor fall sharply when growth resumes low production yields noisy estimates of recovery noise impedes learning slows recovery and makes booms more gradual than downturns a calibrated model generates growth rate asymmetry similar to macroeconomic aggregates fluctuations in agents forecast precision match observed countercyclical errors of forecasters

escaping nash inflation an ordinary differential equation ode gives the mean dynamics that govern the convergence to self confirming equilibria of self referential systems under discounted least squares learning another ode governs escape dynamics that recurrently propel away from a self confirming equilibrium in a model with a unique self confirming equilibrium the escape dynamics make the government discover too strong a version of the natural rate hypothesis the escape route dynamics cause recurrent outcomes close to the ramsey commitment inflation rate in a model with an adaptive government

asymmetric preferences in real time learning and the taylor rule branch 2014 shows that the asymmetric preference of professional forecasters enhances the fit of the original taylor rule with respect to recent us monetary policy this paper investigates the stability of the taylor rule with asymmetric preference under adaptive learning we find that when policy omits asymmetry and learning volatility a more vigorous response to inflation than the pure taylor principle is required

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

fundamentalists vs chartists learning and predictor choice dynamics abstract in a simple forward looking univariate model of price determination we investigate the evolution of expectations dynamics in the presence of two types of agents fundamentalists and chartists in particular we combine evolutionary selection among heterogeneous classes of models through predictor choice dynamics based on a logit model with adaptive learning in the form of parameters updating within each class of rules we find that for different parameterizations it can happen that fundamentalists drive chartists completely out of the market or vice versa and also that heterogeneous equilibria in which fundamentalists and chartists coexist are possible interestingly though only equilibria in which fundamentalists outperform chartists turn out to be adaptively learnable by agents

adaptive learning endogenous uncertainty and asymmetric dynamics abstract i present a simple model where forecasting confidence affects aggregate demand it is shown that this model has similar stability properties under statistical and evolutionary learning as a model without a confidence affect from this setup i introduce expectational business cycles where output fluctuates due to learning heterogeneous forecasting models and random changes in the efficient forecasting model agents use one of two forecasting models to forecast future variables while heterogeneity is dictated via an evolutionary process increased uncertainty due to a shock to the structure of the economy may result in a sudden decrease in output as agents learn the equilibrium output slowly increases to its equilibrium value expectational business cycles tend to arrive faster last longer and are more severe as agents possess less information

learnability of an equilibrium with private information abstract this paper investigates the learnability of an equilibrium with private information agents of each type have their own private information about an exogenous variable and conduct adaptive learning with a heterogeneously misspecified perceived laws of motion plm that includes only this variable the paper shows that the existence of private information has a nonnegative impact on the learnability of the equilibrium that is the condition for learnability is unaffected or relaxed by heterogeneity and or misspecification in plms caused by private information in a new keynesian model with private information about fundamental shocks the learnability of the equilibrium is ensured by the taylor principle of monetary policy the paper also confirms that these results hold true not only in the presence of private information but also in a variety of informational structures

business cycle asymmetry a deeper look this paper distinguishes two types of asymmetry in business cycles deepness and steepness deepness is defined as the characteristic that troughs are further below trend than peaks are above most previous research has focused exclusively on steepness which refers to cycles in which contractions are steeper than expansions a test for deepness is proposed and applied to u s post war quarterly unemployment real gnp and industrial production evidence of deepness is found for unemployment and industrial production while the evidence for real gnp is weaker previous evidence of steepness in unemployment is confirmed

business cycle asymmetries characterisation and testing based on markov switching autoregressions tests for business cycle asymmetries are developed for markov switching autoregressive models the tests of deepness steepness and sharpness are wald statistics which have standard asymptotics for the standard two regime model of expansions and contractions deepness is shown to imply sharpness and vice versa whereas the process is always nonsteep two and three state models of u s gnp growth are used to illustrate the approach along with models of u s investment and consumption growth the robustness of the tests to model misspecification and the effects of regime dependent heteroscedasticity are investigated