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Hysteresis and non-linearities in unemployment rates

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Author Info
Magnus Gustavsson
Pär Österholm

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Abstract

This 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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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.

Volume (Year): 13 (2006)
Issue (Month): 9 (July)
Pages: 545-548
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Handle: RePEc:taf:apeclt:v:13:y:2006:i:9:p:545-548

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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.:
  1. Russell Smyth, 2003. "Unemployment Hysteresis in Australian States and Territories: Evidence from Panel Data Unit Root Tests," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 181-192. [Downloadable!] (restricted)
  2. Jacobson, Tor & Vredin, Anders & Warne, Anders, 1997. "Common trends and hysteresis in Scandinavian unemployment," European Economic Review, Elsevier, vol. 41(9), pages 1781-1816, December. [Downloadable!] (restricted)
  3. Koustas, Zisimos & Veloce, William, 1996. "Unemployment Hysteresis in Canada: An Approach Based on Long-Memory Time Series Models," Applied Economics, Taylor and Francis Journals, vol. 28(7), pages 823-31, July. [Downloadable!] (restricted)
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  4. George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers 118, Board of Governors of the Federal Reserve System (U.S.).
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  5. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November. [Downloadable!] (restricted)
  6. Andrew Clark, 2001. "Unemployment As A Social Norm: Psychological Evidence from Panel Data," DELTA Working Papers 2001-17, DELTA (Ecole normale supérieure). [Downloadable!]
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  7. Ana María Iregui & Jesús Otero, . "On the Dynamics of Unemployment in a Developing Economy: Colombia," Borradores de Economia 208, Banco de la Republica de Colombia. [Downloadable!]
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  8. Ossama Mikhail & Curtis J. Eberwein & Jagdish Handa, 2005. "On the evidence of non-linear structure in Canadian unemployment," Applied Economics Letters, Taylor and Francis Journals, vol. 12(2), pages 101-104, February. [Downloadable!] (restricted)
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  9. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February. [Downloadable!] (restricted)
  10. Graafland, J J, 1989. "Can Hysteresis Explain Different Labour Market Operations between Europe and the United States?," Applied Economics, Taylor and Francis Journals, vol. 21(1), pages 95-111, January.
  11. Assarsson, Bengt & Jansson, Per, 1998. "Unemployment Persostence: The Case of Sweden," Applied Economics Letters, Taylor and Francis Journals, vol. 5(1), pages 25-29, January. [Downloadable!] (restricted)
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  1. Liew , Venus Khim-Sen & Chia, Ricky Chee-Jiun & Puah, Chin-Hong, 2009. "Does Hysteresis in Unemployment Occur in OECD Countries? Evidence from Parametric and Non-Parametric Panel Unit Roots Tests," MPRA Paper 9915, University Library of Munich, Germany. [Downloadable!]
  2. Thomas Maag, 2008. "Economic Correlates of Suicide Rates in OECD Countries," KOF Working papers 08-207, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
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