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Modelling the US, UK and Japanese unemployment rates: Fractional integration and structural breaks

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  • Caporale, Guglielmo Maria
  • Gil-Alana, Luis A.

Abstract

A general procedure for fractional integration and structural breaks at unknown points in time is used, which allows for different orders of integration and deterministic components in each subsample. First, the procedure is extended to the non-linear case, and it is shown by means of Monte Carlo experiments to perform well in a non-linear environment. Second, it is applied to test for a single break in the unemployment rate in the US, the UK and Japan. The results shed some light on the empirical relevance of alternative unemployment theories for these countries. Specifically, a structuralist interpretation appears more appropriate for the US and Japan, whilst a hysteresis model accounts better for the UK experience (and also for the Japanese one in the second subsample). These findings are interpreted in terms of structural instability in labour markets with different features.

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  • 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.
  • Handle: RePEc:eee:csdana:v:52:y:2008:i:11:p:4998-5013
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    Cited by:

    1. Belbute, José, 2013. "Does final demand for energy in Portugal exhibit long memory?," MPRA Paper 45717, University Library of Munich, Germany.
    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. Lean, Hooi Hooi & Smyth, Russell, 2009. "Long memory in US disaggregated petroleum consumption: Evidence from univariate and multivariate LM tests for fractional integration," Energy Policy, Elsevier, vol. 37(8), pages 3205-3211, August.
    4. Davidson, James & Hashimzade, Nigar, 2009. "Type I and type II fractional Brownian motions: A reconsideration," Computational Statistics & Data Analysis, Elsevier, vol. 53(6), pages 2089-2106, April.
    5. Luis A. Gil-Alana & Zeynel Abidin Ozdemir & Aysit Tansel, 2017. "Long Memory in Turkish Unemployment Rates," Koç University-TUSIAD Economic Research Forum Working Papers 1715, Koc University-TUSIAD Economic Research Forum.
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    8. Apergis, Nicholas & Tsoumas, Chris, 2011. "Integration properties of disaggregated solar, geothermal and biomass energy consumption in the U.S," Energy Policy, Elsevier, vol. 39(9), pages 5474-5479, September.
    9. M. de Carvalho & K. F. Turkman & A. Rua, 2013. "Dynamic threshold modelling and the US business cycle," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 62(4), pages 535-550, August.
    10. Guglielmo Maria Caporale & Marinko Skare, 2014. "Long Memory in UK Real GDP, 1851-2013: An ARFIMA-FIGARCH Analysis," Discussion Papers of DIW Berlin 1395, DIW Berlin, German Institute for Economic Research.

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