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Evaluating the Persistence and Structuralist Theories of Unemployment from a Nonlinear Perspective

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Listed:
  • Coakley Jerry

    (University of Essex)

  • Fuertes Ana-María

    (City University)

  • Zoega Gylfi

    (University of London)

Abstract

This paper assesses empirically two competing unemployment theories. It identifies one structural break in U.K. and German unemployment around 1980 that is more severe in both absolute and relative terms than that for the United States in 1973. This offers support for the structuralist theory. A nonlinear (TAR) model is used to capture fast-up, slow-down unemployment dynamics. Impulse response functions suggest that the half-lives of shocks are longer in the postbreak subsamples, especially in Europe, which places the persistence theory closer to the mark. We conclude that elements from both theories are needed for an adequate account of unemployment dynamics.

Suggested Citation

  • Coakley Jerry & Fuertes Ana-María & Zoega Gylfi, 2001. "Evaluating the Persistence and Structuralist Theories of Unemployment from a Nonlinear Perspective," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 5(3), pages 1-25, October.
  • Handle: RePEc:bpj:sndecm:v:5:y:2001:i:3:n:2
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    References listed on IDEAS

    as
    1. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. Granger, Clive W. J. & Terasvirta, Timo, 1999. "A simple nonlinear time series model with misleading linear properties," Economics Letters, Elsevier, vol. 62(2), pages 161-165, February.
    4. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    6. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    7. Hoon, Hian Teck & Phelps, Edmund S., 1997. "Growth, wealth and the natural rate: Is Europe's jobs crisis a growth crisis?," European Economic Review, Elsevier, vol. 41(3-5), pages 549-557, April.
    8. Brooks, Chris, 1999. "Portmanteau Model Diagnostics and Tests for Nonlinearity: A Comparative Monte Carlo Study of Two Alternative Methods," Computational Economics, Springer;Society for Computational Economics, vol. 13(3), pages 249-263, June.
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    Citations

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    Cited by:

    1. Kurmaş Akdoğan, 2015. "Unemployment Hysteresis and Structural Change in Europe," EY International Congress on Economics II (EYC2015), November 5-6, 2015, Ankara, Turkey 266, Ekonomik Yaklasim Association.
    2. Fosten, Jack & Ghoshray, Atanu, 2011. "Dynamic persistence in the unemployment rate of OECD countries," Economic Modelling, Elsevier, vol. 28(3), pages 948-954, May.
    3. Coakley, Jerry & Fuertes, Ana-Maria, 2006. "Testing for sign and amplitude asymmetries using threshold autoregressions," Journal of Economic Dynamics and Control, Elsevier, vol. 30(4), pages 623-654, April.
    4. repec:spr:empeco:v:53:y:2017:i:4:d:10.1007_s00181-016-1171-8 is not listed on IDEAS
    5. van Dijk, Dick & Franses, Philip Hans & Paap, Richard, 2002. "A nonlinear long memory model, with an application to US unemployment," Journal of Econometrics, Elsevier, vol. 110(2), pages 135-165, October.
    6. Coakley, Jerry & Fuertes, Ana-Maria, 2006. "Valuation ratios and price deviations from fundamentals," Journal of Banking & Finance, Elsevier, vol. 30(8), pages 2325-2346, August.
    7. Clemente, Jesus & Lanaspa, Luis & Montanes, Antonio, 2005. "The unemployment structure of the US states," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 848-868, September.
    8. Caporale, Guglielmo Maria & Gil-Alana, Luis A., 2008. "Modelling the US, UK and Japanese unemployment rates: Fractional integration and structural breaks," Computational Statistics & Data Analysis, Elsevier, vol. 52(11), pages 4998-5013, July.

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