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Evaluating The Persistence And Structuralist Theories Of Unemployment

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  • Coakley, Jerry
  • Fuertes, Ana María
  • Zoega, Gylfi

Abstract

This paper uses a threshold autoregressive (TAR) framework to assess the relative importance of structural breaks and asymmetric persistence in accounting for the post-war unemployment experience. In comparing unemployment patterns across time periods and countries, we take the US as a representative flexible labour market and Germany as an archetypically inflexible one, with the UK occupying an intermediate position. Significant breaks are detected in the UK and German series around 1980 suggesting a sharp increase in their respective natural rates. Evidence of asymmetries is also found in the dynamics of unemployment with rapid mean reversion following booms and persistence in the wake of recessions. We conclude that shifts in the natural rate explain differences over longer periods such as decades while asymmetric persistence can shed light on the short to medium run differences.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2438.

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Date of creation: Apr 2000
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Handle: RePEc:cpr:ceprdp:2438

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Related research

Keywords: asymmetries; Bootstrap; Momentum TAR Process; Structural Breaks;

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Cited by:
  1. Marika Karanassou & Hector Sala & Dennis Snower, 2008. "Phillips Curves and Unemployment Dynamics: A Critique and a Holistic Perspective," Kiel Working Papers 1441, Kiel Institute for the World Economy.
  2. Ron Smith & Gylfi Zoega, 2004. "Global Shocks and Unemployment Adjustment," DEGIT Conference Papers c009_003, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Spyros Andreopoulos, 2006. "The real interest rate, the real oil price, and US unemployment revisited," Bristol Economics Discussion Papers 06/592, Department of Economics, University of Bristol, UK.
  4. Neugart, Michael, 2004. "Complicated dynamics in a flow model of the labor market," Journal of Economic Behavior & Organization, Elsevier, vol. 53(2), pages 193-213, February.

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