Dynamic asymmetries in US unemployment

We examine dynamic asymmetries in U.S. unemployment using nonlinear time se ries models and Bayesian methods. We find strong statistical evidence in fa vor of a two-regime threshold autoregressive model. Empirical results indic ate that, once we take into account both parameter and model uncertainty, t here are economically interesting asymmetries in the unemployment rate. One finding of particular interest is that shocks that lower the unemployment rate tend to have a smaller effect than shocks that raise the unemployment rate. This finding is consistent with unemployment rises being sudden and f alls gradual.