Are Economic Time Series Asymmetric over the Business Cycle?

It has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle. The paper provides a statistical test for this hypothesis. Using the framework of finite state Markov processes I implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops. It is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series.