We examine dynamic asymmetries in US unemployment using non-linear time series models and Bayesian methods. We find strong statistical evidence in favour of a two regime threshold autoregressive model. Empirical results indicate that, once we take into account both parameter and model uncertainty, there are economically interesting asymmetries in the unemployment rate. One finding of particular interest is that shocks which lower the unemployment rate tend to have a smaller effect than shocks which raise the unemployment rate. This finding is consistent with unemployment rises being sudden and falls gradual.
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Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number
15.
Find related papers by JEL classification: C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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