Structural Breaks, Regime Change and Asymmetric Adjustment: A Short and Long Run Global Approach to the Output/Unemployment Dynamics
AbstractEven though the output and unemployment relation has always been a key theme in applied macroeconometrics research, the global hypothesis of modular short and long run dynamics assuming classic macroeconomic assumptions, is still to become a widely discussed subject in the field, and, therefore entails a large scope for further improvement, discussion and experimentation. Following recent advances in non linear bivariate estimation techniques this paper evaluates the joint hypotheses of endogenous growth, the natural rate hypothesis and asymmetric short run error correction. To tackle this global proposal a three step methodology, based on numeric grid search procedures is employed on data from nineteen OCDE countries. First, a numerical grid search is used to estimate linear trend output regimes with structural breaks and long run natural Unemployment rate regimes are endogenously obtained from these estimates. Finally, different grid search procedures, based on the original two step procedure for estimating linear cointegration models, are used to estimate the short run adjustment process assuming threshold vector error correction dynamics, following recent proposals on asymmetric Okun adjustment.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14648.
Date of creation: 28 Nov 2008
Date of revision:
Okun Law; Structural Change; Additive-Outlier Models; Bivariate Threshold Vector Error Correction Systems; Output/Unemployment Dynamics;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
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