Hysteresis vs. natural rate of US unemployment
AbstractThis paper investigates the stochastic nature of the unemployment rate allowing for cross-section dependence from a panel of US state-level data. We first employ the PANIC method to identify the common and idiosyncratic components. Powerful recursive mean adjustment (RMA) methods are used to test for unit roots. We find significant evidence of a nonstationary common component when the data from the most recent recession are included. Even when stationarity is empirically supported, the bias-corrected half-life of the common component appears very long, casting doubt on the usefulness of the natural rate hypothesis.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 29 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/30411
Unemployment rate; Natural rate hypothesis; Hysteresis; PANIC; RMA; Cross-section dependence;
Other versions of this item:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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