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Are Unemployment Rates Nonstationary or Nonlinear? Evidence from 19 OECD Countries

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  • Veli YILANCI

    (Istanbul University, Faculty of Economics, Department of Econometrics)

Abstract

This study investigates the stationarity and linearity properties of unemployment rates in 17 OECD countries. We use a new unit root test developed by Kapetanios, Shin and Snell (2003) (KSS) which tests the joint null hypothesis of linearity and a unit root against a nonlinear stationary process. We reject the null hypothesis of a linear unit root so find evidence in support of the natural rate of unemployment for Belgium, Korea, Switzerland, USA, Netherlands and Poland and we unable to reject the null hypothesis of hysteresis for Australia, Austria, Canada, Finland, Germany, Japan, Luxembourg, Norway, Slovak Republic and Turkey according to the KSS test results.

Suggested Citation

  • Veli YILANCI, 2008. "Are Unemployment Rates Nonstationary or Nonlinear? Evidence from 19 OECD Countries," Economics Bulletin, AccessEcon, vol. 3(47), pages 1-5.
  • Handle: RePEc:ebl:ecbull:eb-08c20053
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    References listed on IDEAS

    as
    1. 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.
    2. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76(4), pages 678-678.
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    More about this item

    Keywords

    unemployment rates;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • J0 - Labor and Demographic Economics - - General

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