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Unemployment Hysteresis In Piigs Countries: A New Test With Both Sharp And Smooth Breaks

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  • JING-PING LI

    (Department of Finance and Banking, Shanxi University of Finance & Economics, Shanxi, China)

  • OMID RANJBAR

    (Department of Economics, Allameh Tabataba’i University, Trade Promotion Organization (TPO), Tehran 15134, Iran)

  • TSANGYAO CHANG

    (Department of Finance, Feng Chia University Taichung, Taiwan)

Abstract

In this empirical study, we apply the Panel stationary test with both sharp and smooth breaks to re-examine the hysteresis hypothesis of unemployment for five high-debt countries, Portugal, Ireland, Italy, Greece and Spain (PIIGS) from 1960 to 2011. We find that our proposed model has greater power than a linear method if the true data-generating process of unemployment is a stationary, non-linear process of unknown form with structural changes. Hysteresis in unemployment is confirmed for all PIIGS countries when traditional unit root tests are employed; however, hysteresis in unemployment is confirmed only for Greece when our proposed Panel stationary test with both sharp and smooth breaks is utilized.

Suggested Citation

  • Jing-Ping Li & Omid Ranjbar & Tsangyao Chang, 2017. "Unemployment Hysteresis In Piigs Countries: A New Test With Both Sharp And Smooth Breaks," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(05), pages 1165-1177, December.
    • Handle: RePEc:wsi:serxxx:v:62:y:2017:i:05:n:s0217590815500782
    DOI: 10.1142/S0217590815500782
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    2. Dieu Nsenga & Mirada Nach & Hlalefang Khobai & Clement Moyo & Andrew Phiri, 2018. "Is it the natural rate or hysteresis hypothesis for unemployment in Newly Industrialized Economies?," Working Papers 1817, Department of Economics, Nelson Mandela University, revised Apr 2018.
    3. Nsenga, Dieu & Nach, Mirada & Khobai, Hlalefang & Moyo, Clement & Phiri, Andrew, 2018. "Is it the natural rate or hysteresis hypothesis for unemployment rates in Newly Industrialized Economies?," MPRA Paper 86274, University Library of Munich, Germany.

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