Advanced Search
MyIDEAS: Login

Modelling the US, UK and Japanese unemployment rates: Fractional integration and structural breaks

Contents:

Author Info

  • Caporale, Guglielmo Maria
  • Gil-Alana, Luis A.

Abstract

A general procedure for fractional integration and structural breaks at unknown points in time is used, which allows for different orders of integration and deterministic components in each subsample. First, the procedure is extended to the non-linear case, and it is shown by means of Monte Carlo experiments to perform well in a non-linear environment. Second, it is applied to test for a single break in the unemployment rate in the US, the UK and Japan. The results shed some light on the empirical relevance of alternative unemployment theories for these countries. Specifically, a structuralist interpretation appears more appropriate for the US and Japan, whilst a hysteresis model accounts better for the UK experience (and also for the Japanese one in the second subsample). These findings are interpreted in terms of structural instability in labour markets with different features.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V8V-4SC78KW-1/1/4db0cb865a44de068cb172a6c0f8ece3
Download Restriction: Full text for ScienceDirect subscribers only.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

Volume (Year): 52 (2008)
Issue (Month): 11 (July)
Pages: 4998-5013

as in new window
Handle: RePEc:eee:csdana:v:52:y:2008:i:11:p:4998-5013

Contact details of provider:
Web page: http://www.elsevier.com/locate/csda

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Davidson, James & Terasvirta, Timo, 2002. "Long memory and nonlinear time series," Journal of Econometrics, Elsevier, vol. 110(2), pages 105-112, October.
  2. Ricardo J. Caballero & Mohamad L. Hammour, 1991. "The Cleansing Effect of Recessions," NBER Working Papers 3922, National Bureau of Economic Research, Inc.
  3. Leon-Ledesma, Miguel A, 2002. "Unemployment Hysteresis in the US States and the EU: A Panel Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 95-103, April.
  4. Luis Gil-Alana, 2002. "Modelling the Persistence of Unemployment in Canada," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(4), pages 465-477.
  5. van Dijk, Dick & Franses, Philip Hans & Paap, Richard, 2002. "A nonlinear long memory model, with an application to US unemployment," Journal of Econometrics, Elsevier, vol. 110(2), pages 135-165, October.
  6. Francis X. Diebold & Glenn D. Rudebusch, 1988. "Long memory and persistence in aggregate output," Finance and Economics Discussion Series 7, Board of Governors of the Federal Reserve System (U.S.).
  7. Diebold, Francis X. & Inoue, Atsushi, 2001. "Long memory and regime switching," Journal of Econometrics, Elsevier, vol. 105(1), pages 131-159, November.
  8. Luis A. Gil-Alana, . "Fractional integration and structural breaks at unknown periods of time," Faculty Working Papers 16/06, School of Economics and Business Administration, University of Navarra.
  9. Edmund S. Phelps, 1999. "Behind This Structural Boom: The Role of Asset Valuations," American Economic Review, American Economic Association, vol. 89(2), pages 63-68, May.
  10. Haldrup, Niels & Nielsen, Morten Orregaard, 2007. "Estimation of fractional integration in the presence of data noise," Computational Statistics & Data Analysis, Elsevier, vol. 51(6), pages 3100-3114, March.
  11. Enders, Walter & Granger, C. W. J., 1998. "Unit Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Staff General Research Papers 1388, Iowa State University, Department of Economics.
  12. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  13. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Durbin, J, 1970. "Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors are Lagged Dependent Variables," Econometrica, Econometric Society, vol. 38(3), pages 410-21, May.
  15. Gordon, Robert J, 1989. "Hysteresis in History: Was There Ever a Phillips Curve?," American Economic Review, American Economic Association, vol. 79(2), pages 220-25, May.
  16. Campbell, J.Y. & Perron, P., 1991. "Pitfalls and Opportunities: What Macroeconomics should know about unit roots," Papers 360, Princeton, Department of Economics - Econometric Research Program.
  17. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  18. Philip Rothman, . "Forecasting Asymmetric Unemployment Rates," Working Papers 9618, East Carolina University, Department of Economics.
  19. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
  20. Nuno Crato & Philip Rothman, . "Measuring Hysteresis in Unemployment Rates with Long Memory Models," Working Papers 9619, East Carolina University, Department of Economics.
  21. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  22. Coakley Jerry & Fuertes Ana-María & Zoega Gylfi, 2001. "Evaluating the Persistence and Structuralist Theories of Unemployment from a Nonlinear Perspective," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 5(3), pages 1-25, October.
  23. DeJong, David N. & Nankervis, John C. & Savin, N. E. & Whiteman, Charles H., 1992. "The power problems of unit root test in time series with autoregressive errors," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 323-343.
  24. Cross, Rod B, 1987. " Hysteresis and Instability in the Natural Rate of Unemployment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 89(1), pages 71-89.
  25. Luis Gil-Alana, 2001. "The persistence of unemployment in the USA and Europe in terms of fractionally ARIMA models," Applied Economics, Taylor & Francis Journals, vol. 33(10), pages 1263-1269.
  26. Rolf TSCHERNIG & Klaus F. ZIMMERMANN, 1992. "Illusive Persistence in German Unemployment," Discussion Papers (REL - Recherches Economiques de Louvain) 1992044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  27. Ruiz, Esther & Veiga, Helena, 2008. "Modelling long-memory volatilities with leverage effect: A-LMSV versus FIEGARCH," Computational Statistics & Data Analysis, Elsevier, vol. 52(6), pages 2846-2862, February.
  28. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
  29. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-76, April.
  30. Steve Nickell & Jan van Ours, 2000. "The Netherlands and the United Kingdom: a European unemployment miracle?," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 135-180, 04.
  31. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  32. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
  33. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
  34. Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1303-10, November.
  35. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
  36. Song, Frank M. & Wu, Yangru, 1998. "Hysteresis in unemployment: Evidence from OECD countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(2), pages 181-192.
  37. D Marinucci & Peter Robinson, 2001. "Narrow-band analysis of nonstationary processes," LSE Research Online Documents on Economics 2015, London School of Economics and Political Science, LSE Library.
  38. Bianchi, Marco & Zoega, Gylfi, 1995. "Unemployment Persistence : Does the Size of the Shock Matter ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1995014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  39. Anderton, Robert, 1998. "Policy Regimes and the Persistence of Wage Inflation and Unemployment," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(4), pages 418-38, September.
  40. Zeileis, Achim & Kleiber, Christian & Kramer, Walter & Hornik, Kurt, 2003. "Testing and dating of structural changes in practice," Computational Statistics & Data Analysis, Elsevier, vol. 44(1-2), pages 109-123, October.
  41. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
  42. D. Marinucci & Peter M. Robinson, 2001. "Narrow-band analysis of nonstationary processes," LSE Research Online Documents on Economics 303, London School of Economics and Political Science, LSE Library.
  43. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  44. Acemoglu, Daron & Scott, Andrew, 1994. "Asymmetries in the Cyclical Behaviour of UK Labour Markets," Economic Journal, Royal Economic Society, vol. 104(427), pages 1303-23, November.
  45. Olivier J. Blanchard, 1986. "Hysteresis and Unemployment," Working papers 430, Massachusetts Institute of Technology (MIT), Department of Economics.
  46. Lee, Dongin & Schmidt, Peter, 1996. "On the power of the KPSS test of stationarity against fractionally-integrated alternatives," Journal of Econometrics, Elsevier, vol. 73(1), pages 285-302, July.
  47. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
  48. Graafland, J J, 1991. "On the Causes of Hysteresis in Long-Term Unemployment in the Netherlands," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(2), pages 155-70, May.
  49. David H. Papell & Christian J. Murray & Hala Ghiblawi, 2000. "The Structure of Unemployment," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 309-315, May.
  50. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  51. Hassler, Uwe & Wolters, Jurgen, 1994. "On the power of unit root tests against fractional alternatives," Economics Letters, Elsevier, vol. 45(1), pages 1-5, May.
  52. Proietti, Tommaso, 2003. "Forecasting the US unemployment rate," Computational Statistics & Data Analysis, Elsevier, vol. 42(3), pages 451-476, March.
  53. Kyung-So Im & Junsoo Lee & Margie Tieslau, 2005. "Panel LM Unit-root Tests with Level Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 393-419, 06.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Belbute, José, 2013. "Does final demand for energy in Portugal exhibit long memory?," MPRA Paper 45717, University Library of Munich, Germany.
  2. Lean, Hooi Hooi & Smyth, Russell, 2009. "Long memory in US disaggregated petroleum consumption: Evidence from univariate and multivariate LM tests for fractional integration," Energy Policy, Elsevier, vol. 37(8), pages 3205-3211, August.
  3. Fosten, Jack & Ghoshray, Atanu, 2011. "Dynamic persistence in the unemployment rate of OECD countries," Economic Modelling, Elsevier, vol. 28(3), pages 948-954, May.
  4. James Davidson & Nigar Hashimzade, 2008. "Type I and Type II Fractional Brownian Motions: a Reconsideration," Discussion Papers 0816, Exeter University, Department of Economics.
  5. Apergis, Nicholas & Tsoumas, Chris, 2011. "Integration properties of disaggregated solar, geothermal and biomass energy consumption in the U.S," Energy Policy, Elsevier, vol. 39(9), pages 5474-5479, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:csdana:v:52:y:2008:i:11:p:4998-5013. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.