Steepness and deepness in the Australian macroeconomy
This study uses nonparametric tests - the triples test and the BDS test, to examine whether key Australian macroeconomic aggregates exhibit nonlinearities and important 'steepness' and 'deepness' asymmetries at the business cycle frequency. Evidence is found of nonlinearities but there is little evidence of deepness in the Australian macroeconomy. However, there is evidence of steepness, especially concerning labour market variables, as well as both the CPI and M3. The evidence suggests that unemployment (employment) rises (falls) rapidly in recessions and only recovers slowly over time. Also, positive asymmetries in M3 are reflected in similar asymmetries in the CPI but not in output, consumption or investment.