Hysteresis and non-linearities in unemployment rates
AbstractThis study tests whether there is evidence of mean reversion in unemployment rates using the recently developed unit root test of Kapetanios et al. (2003). In this framework, the null hypothesis of a unit root process is tested against the alternative of a globally stationary exponential smooth transition autoregressive process. Applying the test to monthly data for Australia, Canada, Finland, Sweden and the USA, it is concluded that unemployment hysteresis finds less support when non-linearities are allowed for compared to the benchmark of using a standard Augmented Dickey-Fuller test.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 13 (2006)
Issue (Month): 9 ()
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