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Hysteresis in Unemployment Rates? A Comparison between Germany and the US

  • Uwe Hassler

    ()

    (Universitaet Frankfurt)

  • Jürgen Wolters

    ()

    (Freie Universitaet Berlin)

In this paper we compare the unemployment dynamics of the US and Germany with monthly data up to 2008. With data from 1971 on the evidence is mixed when applying descriptive methods or formal unit root tests. When allowing for fractional integration, however, we find similar results to the literature in that shocks to US data seem to be transitory while having permanent effects on German unemployment. This difference in hysteresis, however, depends on the sample. Using recursive and rolling techniques we observe that shocks in US subsamples until the mid-nineties are clearly more transitory than in more recent subsamples.We conclude that hysteresis has turned into a dominating feature also on US labour market more recently.

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Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 229 (2009)
Issue (Month): 2-3 (June)
Pages: 119-129

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Handle: RePEc:jns:jbstat:v:229:y:2009:i:2-3:p:119-129
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  1. Peter C.B. Phillips & Zhijie Xiao, 1998. "A Primer on Unit Root Testing," Cowles Foundation Discussion Papers 1189, Cowles Foundation for Research in Economics, Yale University.
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  18. Nuno Crato & Philip Rothman, . "Measuring Hysteresis in Unemployment Rates with Long Memory Models," Working Papers 9619, East Carolina University, Department of Economics.
  19. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
  20. Luis Gil-Alana, 2001. "The persistence of unemployment in the USA and Europe in terms of fractionally ARIMA models," Applied Economics, Taylor & Francis Journals, vol. 33(10), pages 1263-1269.
  21. Hassler, Uwe & Wolters, Jurgen, 1994. "On the power of unit root tests against fractional alternatives," Economics Letters, Elsevier, vol. 45(1), pages 1-5, May.
  22. Philip Arestis & Iris Biefang-Frisancho Mariscal, 2000. "OECD unemployment: structural breaks and stationarity," Applied Economics, Taylor & Francis Journals, vol. 32(4), pages 399-403.
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