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Unemployment, Hysteresis And Transition

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Author Info
Miguel A. León-Ledesma
Peter McAdam

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Abstract

In this paper, we quantify the degree of persistence in the unemployment rates of transition countries using a variety of methods benchmarked against the EU. Initially, we work with the concept of linear 'Hysteresis' as described by the presence of unit roots in unemployment as in most empirical research on this area. Given that this is potentially a narrow definition, we also take into account the existence of structural breaks and nonlinear dynamics in unemployment. Finally, we examine whether CEECs' unemployment presents features of multiple equilibria, that is, if it remains locked into a new level whenever some structural change or sufficiently large shock occurs. Our findings show that, in general, we can reject the unit-root hypothesis after controlling for structural changes and business-cycle effects, but we can observe the presence of a high and low unemployment equilibria. The speed of adjustment is faster for CEECs than the EU, although CEECs tend to move more frequently between equilibria. Copyright (c) Scottish Economic Society 2004.

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Publisher Info
Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 51 (2004)
Issue (Month): 3 (08)
Pages: 377-401
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Handle: RePEc:bla:scotjp:v:51:y:2004:i:3:p:377-401

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  1. Marco Bianchi & Gylfi Zoega, 1998. "Unemployment persistence: does the size of the shock matter?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(3), pages 283-304. [Downloadable!]
  2. Arestis, Philip & Biefang-Frisancho Mariscal, Iris, 1999. "Unit roots and structural breaks in OECD unemployment," Economics Letters, Elsevier, vol. 65(2), pages 149-156, November. [Downloadable!] (restricted)
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  1. Kerstin Gerling & Hans Peter Grüner & Alexandra Kiel & Elisabeth Schulte, 2003. "Information acquisition and decision making in committees: A survey," Working Paper Series 256, European Central Bank. [Downloadable!]
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  2. Christian Dreger & Hans-Eggert Reimers, 2006. "Hysteresis and Persistence in the Course of Unemployment : The EU and US Experience," Discussion Papers of DIW Berlin 572, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  3. Xavier Raurich & Hector Sala Lorda & Valeri Sorolla, 2004. "Unemployment, growth and fiscal policy: new insights on the hysteresis hypothesis," Working Papers wpdea0404, Department of Applied Economics at Universitat Autonoma of Barcelona. [Downloadable!]
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  4. Yunus Aksoy & Miguel A. León-Ledesma, 2007. "Non-linearities and Unit Roots in G7 Macroeconomic Variables," Birkbeck Working Papers in Economics and Finance 0710, Birkbeck, School of Economics, Mathematics & Statistics. [Downloadable!]
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  5. Matteo Lanzafame, 2006. "The Nature of Regional Unemployment in Italy," ERSA conference papers ersa06p155, European Regional Science Association. [Downloadable!]
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  6. Ralph Süppel, 2003. "Comparing economic dynamics in the EU and CEE accession countries," Working Paper Series 267, European Central Bank. [Downloadable!]
  7. Claus Brand & Hans-Eggert Reimers & Franz Seitz, 2003. "Forecasting real GDP: What role for narrow money?," Working Paper Series 254, European Central Bank. [Downloadable!]
  8. William A. Barnett, 2003. "Aggregation-theoretic monetary aggregation over the Euro area; when countries are heterogeneous," Working Paper Series 260, European Central Bank. [Downloadable!]
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  9. Alessandro Calza & João Sousa, 2003. "Why has broad money demand been more stable in the Euro area than in other economies? A literature review," Working Paper Series 261, European Central Bank. [Downloadable!]
  10. Marco Catenaro & Jean-Pierre Vidal, 2003. "Implicit tax co-ordination under repeated policy interactions," Working Paper Series 259, European Central Bank. [Downloadable!]
  11. Mariam Camarero & Josep Lluis Carrion Silvestre & Cecilio Tamarit, 2005. "Unemployment dynamics and NAIRU estimates for CEECs : A univariate approach," Working Papers in Economics 131, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
  12. Annick Bruggeman & Paola Donati & Anders Warne, 2003. "Is the demand for Euro area M3 stable?," Working Paper Series 255, European Central Bank. [Downloadable!]
  13. Alistair Dieppe & Jerome Henry & Peter Mc Adam, . "Labour market dynamics in the euro area: A model-based sensitivity analysis," Modeling, Computing, and Mastering Complexity 2003 09, Society for Computational Economics. [Downloadable!]
  14. Alicia Pérez Alon & Silvestro Di Sanzo, 2005. "Unemployment And Hysteresis: A Nonlinear Unobserved Components Approach," Working Papers. Serie AD 2005-34, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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