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Decoding unemployment persistence: an econometric framework for identifying and comparing the sources of persistence with an application to UK macrodata

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  • Niels Framroze Møller

    (Technical University of Denmark)

Abstract

Most econometric analyses of persistence focus on the existence of non-stationary unemployment but not the origin of this. The present research contains a multivariate econometric framework for identifying and comparing different sources of unemployment persistence (e.g., slow adjustment versus a slowly moving equilibrium rate). The framework contains readily applicable formulas for testing different hypotheses of persistence and is used to identify the causes of this in the UK macroeconomy. The evidence suggests that persistence has been due to a slowly moving equilibrium, driven by the price of crude oil, and not to slow adjustment, for example as related to the process of wage formation, as has often been emphasized.

Suggested Citation

  • Niels Framroze Møller, 2019. "Decoding unemployment persistence: an econometric framework for identifying and comparing the sources of persistence with an application to UK macrodata," Empirical Economics, Springer, vol. 56(5), pages 1489-1514, May.
    • Handle: RePEc:spr:empeco:v:56:y:2019:i:5:d:10.1007_s00181-017-1400-9
    DOI: 10.1007/s00181-017-1400-9
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    More about this item

    Keywords

    Cointegration; Equilibrium unemployment; UK unemployment; Unemployment persistence; Unemployment hysteresis; Unit root hysteresis;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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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