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Hysteresis vs. natural rate of unemployment: One, the other, or both?

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  • Kula, Ferit
  • Aslan, Alper

Abstract

This paper re-examines the empirical validity of the hysteresis hypothesis in unemployment rates in terms of education level in 17 OECD countries. To this end for unbalanced panel, we employ Pesaran’s Cross Sectional Dependence (CD) and Cross-Sectionally Augmented ADF (CADF) tests. Our empirical findings provide that the evidence is favorable to the non-stationary of the unemployment rates by primary and secondary education attainment in total unemployment, and therefore the existence of hysteresis while there is no evidence of hysteresis for unemployment rates by tertiary education.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14054.

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Date of creation: 01 Jan 2008
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Handle: RePEc:pra:mprapa:14054

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Keywords: Hysteresis; unemployment; the natural rate hypothesis;

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