We investigate asymmetries in the conditional mean dynamics of four sectors of the U.S. GDP data. Since the statistical evidence on nonlinearities in the conditional mean could be influenced by the presence of outliers, or by a failure to model conditional heteroskedasticity, we explicitly account for outliers by assuming that the innovations are drawn from the stable family, and model time-varying volatility by a GARCH(1,1) process. We also allow for the possibility of long memory in the

more »

... with fractional differencing. Our results indicate only weak evidence of significant nonlinearities in the conditional mean in some sectors of the GDP. Keywords. GDP, symmetric stable distributions, conditional heteroskedasticity, long memory, nonlinearity the Sixth Annual Symposium of the SNDE at New York University in March 1998. I would like to thank the audience at that meeting, Bruce Mizrach (discussant and editor), and two anonymous referees for constructive comments. M. S. Sadique assisted with computations for this paper. I retain responsibility for all remaining errors and omissions.