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

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  • 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.

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Bibliographic Info

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

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

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Handle: RePEc:eee:csdana:v:52:y:2008:i:11:p:4998-5013

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Cited by:
  1. Luis F. Martins & Paulo M.M. Rodrigues, 2010. "Testing for Persistence Change in Fractionally Integrated Models: An Application to World Inflation Rates," Working Papers w201030, Banco de Portugal, Economics and Research Department.
  2. Belbute, José, 2013. "Does final demand for energy in Portugal exhibit long memory?," MPRA Paper 45717, University Library of Munich, Germany.
  3. Guglielmo Maria Caporale & Marinko Skare, 2014. "Long Memory in UK Real GDP, 1851-2013: An ARFIMA-FIGARCH Analysis," Discussion Papers of DIW Berlin 1395, DIW Berlin, German Institute for Economic Research.
  4. 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.
  5. 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.
  6. James Davidson & Nigar Hashimzade, 2008. "Type I and Type II Fractional Brownian Motions: a Reconsideration," Discussion Papers 0816, Exeter University, Department of Economics.
  7. Fosten, Jack & Ghoshray, Atanu, 2011. "Dynamic persistence in the unemployment rate of OECD countries," Economic Modelling, Elsevier, vol. 28(3), pages 948-954, May.

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