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Unemployment and common smooth transition trends in Central and Eastern European Countries

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Author Info
Juan Carlos Cuestas
Javier Ordóñez

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Abstract

In the present paper we analyse the existence of common nonlinear trends in several of Central and Eastern European Countries in order to gain some insight about the degree of labour market integration within the area. In order to do so, we test for the order of integration of the unemployment rates, by applying the Leybourne et al. (1998) and Kapetanios et al. (2003) nonlinear unit root tests. Our results pinpoint the fact that five up to eight unemployment rates are stationary around a nonlinear trend and, by means of Anderson and Vahid (1998) approach, we also find that there is a common trend that drives the long run behaviour of that variable in these countries.

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File URL: http://www.ntu.ac.uk/research/document_uploads/87123.pdf
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Publisher Info
Paper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2009/5.

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Date of creation: Jul 2009
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Handle: RePEc:nbs:wpaper:2009/5

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Web page: http://www.ntu.ac.uk/nbs

For technical questions regarding this item, or to correct its listing, contact: (Juan Carlos Cuestas).

Related research
Keywords: Unemployment; Central and Eastern Europe; unit roots; smooth transition; nonlinearities.;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution

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  1. West, Kenneth D., 1987. "A note on the power of least squares tests for a unit root," Economics Letters, Elsevier, vol. 24(3), pages 249-252. [Downloadable!] (restricted)
  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.
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  3. Anderson, Heather M. & Vahid, Farshid, 1998. "Testing multiple equation systems for common nonlinear components," Journal of Econometrics, Elsevier, vol. 84(1), pages 1-36, May. [Downloadable!] (restricted)
  4. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February. [Downloadable!] (restricted)
  5. Gil-Alana, Luis A., 2002. "Structural breaks and fractional integration in the US output and unemployment rate," Economics Letters, Elsevier, vol. 77(1), pages 79-84, September. [Downloadable!] (restricted)
  6. Mariam Camarero & Josep Lluís Carrion-i-Silvestre & Cecilio Tamarit, 2008. "Unemployment Hysteresis in Transition Countries: Evidence using Stationarity Panel Tests with Breaks," Review of Development Economics, Blackwell Publishing, vol. 12(3), pages 620-635, 08. [Downloadable!] (restricted)
  7. Camarero, Mariam & Carrion-i-Silvestre, Josep Lluis & Tamarit, Cecilio, 2005. "Unemployment dynamics and NAIRU estimates for accession countries: A univariate approach," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 584-603, September. [Downloadable!] (restricted)
  8. Bierens, Herman J., 1997. "Testing the unit root with drift hypothesis against nonlinear trend stationarity, with an application to the US price level and interest rate," Journal of Econometrics, Elsevier, vol. 81(1), pages 29-64, November. [Downloadable!] (restricted)
  9. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Fiscal increasing returns, hysteresis, real wages and unemployment," European Economic Review, Elsevier, vol. 31(3), pages 543-560, April. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
  11. Franchi, Massimo & Ordóñez, Javier, 2008. "Common smooth transition trend-stationarity in European unemployment," Economics Letters, Elsevier, vol. 101(2), pages 106-109, November. [Downloadable!] (restricted)
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