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Persistence and non-linearity in US unemployment: A regime-switching approach

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  • Cevik, Emrah Ismail
  • Dibooglu, Sel

Abstract

This article examines persistence and nonlinearity in the US unemployment rate in the post-war period by using a regime-switching unit root test. The empirical results indicate that a regime-switching unit root test outperforms conventional unit root tests and describes unemployment behavior better over the business cycle in the sample. While shocks to US unemployment dissipate in expansions, shocks to the unemployment rate seem to be persistent in recessions, supporting the hysteresis hypothesis. This is consistent with the usual explanation of hysteresis that workers may lose valuable job skills in protracted recessions.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Systems.

Volume (Year): 37 (2013)
Issue (Month): 1 ()
Pages: 61-68

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Handle: RePEc:eee:ecosys:v:37:y:2013:i:1:p:61-68

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Related research

Keywords: Unemployment; Hysteresis; Markov switching model; Persistence;

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References

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