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Stochastic shifts in the natural rate of unemployment: evidence from Greece

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  • Margarita Katsimi

Abstract

The paper aims at estimating the natural rate of unemployment in Greece. The methodology adopted follows that of Hamilton. It is assumed that the rate of unemployment follows a stochastic process with periodic shifts in the mean and variance. The natural rate is then estimated using a Markov switching process. Empirical evidence is found that the Greek economy switches over time between two regimes: a regime in which the natural rate and the variance of the rate of unemployment are low (the 1970s); and a regime in which both the natural rate and the variance of the rate of unemployment are high (the 1960s, 1980s and 1990s).

Suggested Citation

  • Margarita Katsimi, 2000. "Stochastic shifts in the natural rate of unemployment: evidence from Greece," Applied Economics Letters, Taylor & Francis Journals, vol. 7(4), pages 239-242.
    • Handle: RePEc:taf:apeclt:v:7:y:2000:i:4:p:239-242
    DOI: 10.1080/135048500351582
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    References listed on IDEAS

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    1. Marco Bianchi & Gylfi Zoega, 1998. "Unemployment persistence: does the size of the shock matter?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(3), pages 283-304.
    2. Bianchi, Marco & Zoega, Gylfi, 1997. "Challenges facing natural rate theory," European Economic Review, Elsevier, vol. 41(3-5), pages 535-547, April.
    3. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    4. Mr. Dimitri G Demekas & Mr. Zenon Kontolemis, 1996. "Unemployment in Greece: A Survey of the Issues," IMF Working Papers 1996/091, International Monetary Fund.
    5. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    6. 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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    Cited by:

    1. Bakas, Dimitrios & Papapetrou, Evangelia, 2014. "Unemployment in Greece: Evidence from Greek regions using panel unit root tests," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 551-562.
    2. Evangelia Papapetrou & Dimitrios Bakas, 2012. "Unemployment in Greece: evidence from Greek regions," Working Papers 146, Bank of Greece.
    3. Ilias Livanos, 2009. "Modelling the incidence of unemployment: the case of Greece," Applied Economics Letters, Taylor & Francis Journals, vol. 16(16), pages 1607-1611.
    4. Fabio Gomes & Cleomar Gomes da Silva, 2007. "Hysteresis vs. natural rate of unemployment in Brazil and Chile," Applied Economics Letters, Taylor & Francis Journals, vol. 15(1), pages 53-56.
    5. Konstantinos Gourzis & Stelios Gialis, 2019. "Dismantled Spatial Fixes in the Aftermath of Recession: Capital Switching and Labour Underutilization in the Greek Capital Metropolitan Region," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 43(4), pages 741-759, July.

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