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Hysteresis in European labour market

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  • Furuoka, Fumitaka

Abstract

This paper revisits the hysteresis and unemployment problem in Europe by using new data and some innovative methods. Blanchard and Summers are among first researchers to detect the existence of unemployment hysteresis and to attribute the hysteresis effects to the European unemployment problem (Blanchard and Summers, 1986). Despite numerous empirical inquiries on this topic, researchers have not decided whether the hysteresis would exist in unemployment. Thus, this paper chooses five countries in the region, namely France, Germany, Italy, Spain and United Kingdom, and examines systematically their unemployment behaviours by employing several different econometric tests, such as the SUR-ADF test (Breuer et al., 2002), the Fourier ADF (FADF) test (Enders and Lee, 2012) and the SUR-Fourier ADF (SUR-FADF) test. These four tests produced consistent findings that unemployment rates in these five European countries could be described as the unit root process. In other words, these different unit root tests uniformly detected the existence of hysteresis in these five countries in line with the hysteresis hypothesis.

Suggested Citation

  • Furuoka, Fumitaka, 2014. "Hysteresis in European labour market," MPRA Paper 60946, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60946
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    References listed on IDEAS

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    1. Omay, Tolga & Shahbaz, Muhammad & Stewart, Chris, 2021. "Is There Really Hysteresis in OECD Countries’ Unemployment Rates? New Evidence Using a Fourier Panel Unit Root Test," MPRA Paper 107691, University Library of Munich, Germany, revised 10 May 2021.

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    More about this item

    Keywords

    Unemployment hysteresis; Europe; unit root; nonlinear;
    All these keywords.

    JEL classification:

    • 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

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