Testing Business Cycles Asymmetry in Central and Eastern European Countries

Abstract

The idea of business cycles asymmetry is not new in economic theory. According to business cycles asymmetry, a country’s economy behaves differently during economic growth periods as compared to economic recession periods. The results achieved by business cycles asymmetry testing are far from unanimous: some are positive, others are negative. Business cycles asymmetry has major econometric implications: business cycles cannot be modeled using linear models. This paper aims to test business cycles asymmetry in Central and Eastern European Countries, where few business cycles analyses, and especially business cycles asymmetry researches, have been conducted. The industrial production index was considered when testing business cycles asymmetry. We estimated business cycles using the Hodrick-Prescott filter and Mills’ test of asymmetry. Mira’s test was also employed to test results reliability. According to our results, business cycles in Central and Eastern European countries are not asymmetric.