Asymmetries in the conditional mean dynamics of real GNP: Robust evidence

We investigate asymmetries in the conditional mean dynamics of U.S. GNP. Be cause the statistical evidence on nonlinearities in the conditional mean co uld be influenced by the presence of outliers or by a failure to model cond itional heteroskedasticity, we explicitly account for outliers by assuming that the innovations are drawn from the stable family, and model time-varyi ng volatility by a GARCH(1, 1) process. We also allow for the possibility o f long memory in the series with fractional differencing. Our results indic ate statistically significant nonlinearities in the conditional mean that p ersist even after accounting for these features in the data.