Business Cycle Asymmetries in Turkey: An Application of Markov-Switching Autoregressions

다국어 초록 (Multilingual Abstract)

This paper examines business cycle characteristics of Turkish economy in the liberalization pe-
riod (post-1980 period) using a Markov-switching Autoregressive (MSAR) model framework. The
importance of model selection process is emphasized in an extensive search for the appropriate MS
model. The business cycle properties are found to be very sensitive to the state dimension, the
choice of the MS model (classi¯ed according to regime-dependent parameters) and the autoregres-
sive lag order. The chosen two-regime MS model suggests four recessionary and ¯ve expansionary
phases in the post-1980 period. Business cycle phases are found to be asymmetric with probability
of switching from a recession to expansion exceeding the probability of switching from expansion
to recession. The paper also provides evidence on the usefulness of a non-linear model as compared
to linear alternative in the context of business cycle research in an emerging economy using various
parametric and nonparametric tests. Nonlinear and linear models are compared and evaluated
using kernel density and conditional expectation estimates by simulating data from respective
models.

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