Asymmetries in the Cyclical Behaviour of UK Labour Markets.

This paper examines the connection between the business cycle, nonlinearities, and asymmetries in the U.K. labor market. The economy is shown to display cyclical asymmetries; stochastic properties of variables such as employment, unemployment, real wages, and the unemployment-vacancy ratio crucially depend upon the state of the business cycle. The authors show that, in most cases, conditioning on the state of the cycle removes residual nonlinearities and is more successful than the linear and a number of nonlinear time-series models. The robustness of the authors' findings is confirmed using a variety of diagnostics and alternative measures of the cycle. Copyright 1994 by Royal Economic Society.