ASYMMETRIES IN THE CYCLICAL BEHAVIOR OF UK LABOR-MARKETS

This paper examines the connection between the business cycle, non-lin earities and asymmetries in the UK labour market. The economy is shown to display cyclical asymmetries; stochastic properties of variables s uch as employment, unemployment, real wages and the unemployment-vacan cy ratio crucially depend upon the state of the business cycle. We sho w that in most cases conditioning on the state of the cycle removes re sidual non-linearities and is more successful than the linear and a nu mber of non-linear time-series models. The robustness of our findings is confirmed using a variety of diagnostics and alternative measures o f the cycle.