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Mean reversion in the US unemployment rate - evidence from bootstrapped out-of-sample forecasts


  • Magnus Gustavsson
  • Par Osterholm


This article investigates whether the US unemployment rate is best described as a unit-root or mean-reverting process. An out-of-sample forecast exercise is conducted in which the performance of an autoregressive (AR) model with an imposed unit root is compared with that of a mean-reverting AR model. A bootstrap distribution for the relative root mean square forecast error is generated and provides strong support for mean reversion in the US unemployment rate.

Suggested Citation

  • Magnus Gustavsson & Par Osterholm, 2011. "Mean reversion in the US unemployment rate - evidence from bootstrapped out-of-sample forecasts," Applied Economics Letters, Taylor & Francis Journals, vol. 18(7), pages 643-646.
  • Handle: RePEc:taf:apeclt:v:18:y:2011:i:7:p:643-646
    DOI: 10.1080/13504851003761855

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    Cited by:

    1. Fumitaka Furuoka, 2015. "Unemployment Hysteresis in the “Nordic Kitten”: Evidence from Five Estonian Regions," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(5), pages 631-642, December.

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