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Unemployment Hysteresis: Empirical Evidence for Latin America

Author

Listed:
  • Astrid Ayala
  • Juncal Cuñado
  • Luis Albériko Gil-Alana

Abstract

This paper analyzes the unemployment dynamics of 18 Latin American countries for the last four decades. We use a time series approach to test the mean reversion of unemployment rates and its approximation to a Natural Rate of Unemployment (NRU). The tests include the possibility of one and two structural changes to account for the occurrence of significant macroeconomic changes experienced by the Latin American economies. In addition, we estimate the order of integration of the series, allowing for fractional degrees of differentiation, to assess the persistence of unemployment in the region. Our results indicate that when endogenous structural changes are included in the model, in general we find evidence of mean reversion of unemployment rates for the Latin American countries under study. Therefore, our findings support the structuralist hypothesis of unemployment.

Suggested Citation

  • Astrid Ayala & Juncal Cuñado & Luis Albériko Gil-Alana, 2012. "Unemployment Hysteresis: Empirical Evidence for Latin America," Journal of Applied Economics, Taylor & Francis Journals, vol. 15(2), pages 213-233, November.
    • Handle: RePEc:taf:recsxx:v:15:y:2012:i:2:p:213-233
    DOI: 10.1016/S1514-0326(12)60010-5
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    Cited by:

    1. Kurmaş Akdoğan, 2017. "Unemployment hysteresis and structural change in Europe," Empirical Economics, Springer, vol. 53(4), pages 1415-1440, December.
    2. Belke, Ansgar & Göcke, Matthias & Werner, Laura, 2014. "Hysteresis Effects in Economics – Different Methods for Describing Economic Path-dependence," Ruhr Economic Papers 468, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Nsenga, Dieu & Nach, Mirada & Khobai, Hlalefang & Moyo, Clement & Phiri, Andrew, 2018. "Is it the natural rate or hysteresis hypothesis for unemployment rates in Newly Industrialized Economies?," MPRA Paper 86274, University Library of Munich, Germany.
    4. Dieu Nsenga & Mirada Nach & Hlalefang Khobai & Clement Moyo & Andrew Phiri, 2018. "Is it the natural rate or hysteresis hypothesis for unemployment in Newly Industrialized Economies?," Working Papers 1817, Department of Economics, Nelson Mandela University, revised Apr 2018.
    5. Vuyokazi Pikoko & Andrew Phiri, 2019. "Is There Hysteresis in South African Unemployment? Evidence from the Post-Recessionary Period," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 15(3), pages 365-387, JUNE.
    6. Tolga Omay & Muhammad Shahbaz & Chris Stewart, 2021. "Is there really hysteresis in the OECD unemployment rates? New evidence using a Fourier panel unit root test," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(4), pages 875-901, November.
    7. Omay, Tolga & Shahbaz, Muhammad & Stewart, Chris, 2021. "Is There Really Hysteresis in OECD Countries’ Unemployment Rates? New Evidence Using a Fourier Panel Unit Root Test," MPRA Paper 107691, University Library of Munich, Germany, revised 10 May 2021.
    8. Agbeyegbe, Terence D., 2020. "Bayesian analysis of output gap in Barbados," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    9. repec:zbw:rwirep:0468 is not listed on IDEAS
    10. Ansgar Belke & Matthias Göcke & Laura Werner, 2014. "Hysteresis Effects in Economics – Different Methods for Describing Economic Path-dependence," Ruhr Economic Papers 0468, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    11. Marina Fados & Maria Bohdalova, 2017. "Gender Inequality in Unemployment by Age in Spain, Switzerland and the European Union," MIC 2017: Managing the Global Economy; Proceedings of the Joint International Conference, Monastier di Treviso, Italy, 24–27 May 2017,, University of Primorska Press.
    12. Ebuh U. Godday & Nuruddeen Usman & Afees A. Salisu, 2022. "Testing for unemployment persistence in Nigeria," Economic Change and Restructuring, Springer, vol. 55(4), pages 2605-2630, November.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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