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Testing Unemployment Theories: A Multivariate Long Memory Approach

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  • Guglielmo Maria Caporale
  • Luis A. Gil-Alana
  • Yuliya Lovcha

Abstract

This paper investigates the empirical relevance of different unemployment theories in three major economies, namely the UK, the US and Japan, by estimating the degree of dependence in the unemployment series. Both univariate and multivariate long memory methods are used. The results vary depending on whether the former or the latter approach is followed. Specifically, when taking a univariate approach, the unit root null cannot be rejected in case of the UK and Japanese unemployment series, and some degree of mean reversion (d

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4570.

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Date of creation: 2014
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Handle: RePEc:ces:ceswps:_4570

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Keywords: unemployment rate; multivariate long memory; fractional integration;

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  1. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
  2. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis in Unemployment," NBER Working Papers 2035, National Bureau of Economic Research, Inc.
  4. Graafland, J J, 1991. "On the Causes of Hysteresis in Long-Term Unemployment in the Netherlands," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(2), pages 155-70, May.
  5. Rolf TSCHERNIG & Klaus F. ZIMMERMANN, 1992. "Illusive Persistence in German Unemployment," Discussion Papers (REL - Recherches Economiques de Louvain) 1992044, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  7. Hosoya, Yuzo, 1996. "The quasi-likelihood approach to statistical inference on multiple time-series with long-range dependence," Journal of Econometrics, Elsevier, vol. 73(1), pages 217-236, July.
  8. Ignacio N. Lobato & Carlos Velasco, 2005. "Efficient Wald Tests For Fractional Unit Roots," Economics Working Papers we056935, Universidad Carlos III, Departamento de Economía.
  9. Edmund S. Phelps, 1999. "Behind This Structural Boom: The Role of Asset Valuations," American Economic Review, American Economic Association, vol. 89(2), pages 63-68, May.
  10. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2007. "Nonlinearities and Fractional Integration in the US Unemployment Rate," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(4), pages 521-544, 08.
  11. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  12. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  13. David H. Papell & Christian J. Murray & Hala Ghiblawi, 2000. "The Structure of Unemployment," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 309-315, May.
  14. Marco Bianchi & Gylfi Zoega, 1998. "Unemployment persistence: does the size of the shock matter?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(3), pages 283-304.
  15. Song, Frank M. & Wu, Yangru, 1998. "Hysteresis in unemployment: Evidence from OECD countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(2), pages 181-192.
  16. Luis Gil-Alana, 2002. "Modelling the Persistence of Unemployment in Canada," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(4), pages 465-477.
  17. Leon-Ledesma, Miguel A, 2002. "Unemployment Hysteresis in the US States and the EU: A Panel Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 95-103, April.
  18. Luis A. Gil-Alana & Guglielmo M. Caporale, 2008. "Modelling the US, the UK and Japanese unemployment rates. Fractional integrationand structural breaks," Faculty Working Papers 11/08, School of Economics and Business Administration, University of Navarra.
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