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One Crisis After Another: A Dynamic Unemployment Persistence Analysis For The Gips Countries

Author

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  • Dilem Yıldırım

    (Department of Economics, Middle East Technical University, Ankara, Turkey)

  • Dilan Aydın

    (University of Bologna, Department of Economics, Bologna, Italy)

Abstract

This paper investigates the hypothesis of unemployment hysteresis for GIPS countries (Greece Ireland, Portugal, and Spain) over the period 1998(4)-2019(4). While most of the existing empirical studies assume constant order of integration for unemployment over the sample period, we consider the possibility that, like many macroeconomic variables, unemployment might display changes in persistence, which might result in potential switches between the natural rate and hysteresis hypotheses. In this respect, we adopt a multiple persistence change methodology. Our empirical results suggest that the structural natural rate (hysteresis) hypothesis is supported for Ireland (Portugal) over the entire sample without any change in persistence of the unemployment rate. For the cases of Greece and Spain, on the other hand, our results propose that unemployment is characterized by multiple changes in persistence with the observed dates for persistence changes coinciding with the Great Recession, the European Sovereign debt crisis, and the deepening of economic and labor market reforms launched to retrain the impact of the crises in those countries.

Suggested Citation

  • Dilem Yıldırım & Dilan Aydın, 2021. "One Crisis After Another: A Dynamic Unemployment Persistence Analysis For The Gips Countries," ERC Working Papers 2102, ERC - Economic Research Center, Middle East Technical University, revised Apr 2021.
    • Handle: RePEc:met:wpaper:2102
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    More about this item

    Keywords

    Unemployment; Persistence; Hysteresis; Structural changes; GIPS countries;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G01 - Financial Economics - - General - - - Financial Crises

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