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Testing for hysteresis in unemployment in OECD countries. New evidence using stationarity panel tests with breaks

Listed author(s):
  • Mariam Camarero
  • Josep Lluis Carrion Silvestre
  • Cecilio Tamarit

    (Universitat de Barcelona)

This paper tests hysteresis effects in unemployment using panel data for 19 OECD countries covering the period 1956-2001. The tests exploit the cross-section variations of the series, and additionally, allow for a different number of endogenous breakpoints in the unemployment series. The critical values are simulated based on our specic panel sizes and time periods. The ndings stress the importance of accounting for exogenous shocks in the series and give support to the natural-rate hypothesis of unemployment for the majority of the countries analyzed.

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Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 119.

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Length: 30 pages
Date of creation: 2004
Handle: RePEc:bar:bedcje:2004119
Contact details of provider: Postal:
Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.

Phone: +34 93 402 43 13cazza
Web page: http://www.ere.ub.es
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  1. Brunello, Giorgio, 1990. "Hysteresis and "The Japanese Unemployment Problem": A Preliminary Investigation," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 483-500, July.
  2. Yin-Wong Cheung & Menzie D. Chinn, 1996. "Further Investigation of the Uncertain Unit Root in GNP," NBER Technical Working Papers 0206, National Bureau of Economic Research, Inc.
  3. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Working Papers 1950, National Bureau of Economic Research, Inc.
  4. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
  5. Donald W.K. Andrews & Christopher J. Monahan, 1990. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Cowles Foundation Discussion Papers 942, Cowles Foundation for Research in Economics, Yale University.
  6. Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
  7. Vogelsang, Timothy J & Perron, Pierre, 1998. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1073-1100, November.
  8. Josep Lluis Carrion Silvestre & Tomas del Barrio Castro & Enrique Lopez Bazo, 2003. "Breaking the panels. An application to the GDP per capita," Working Papers in Economics 97, Universitat de Barcelona. Espai de Recerca en Economia.
  9. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  10. Edmund S. Phelps, 1999. "Behind This Structural Boom: The Role of Asset Valuations," American Economic Review, American Economic Association, vol. 89(2), pages 63-68, May.
  11. Song, Frank M. & Wu, Yangru, 1998. "Hysteresis in unemployment: Evidence from OECD countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(2), pages 181-192.
  12. Miguel A. León-Ledesma, 2000. "Unemployment Hysteresis in the US and the EU: a Panel Data Approach," Studies in Economics 0006, School of Economics, University of Kent.
  13. Christiano, Lawrence J, 1992. "Searching for a Break in GNP," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 237-250, July.
  14. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  15. Kåre Johansen, "undated". "Hysteresis in Unemployment: Evidence from Norwegian Counties," Working Paper Series 0602, Department of Economics, Norwegian University of Science and Technology, revised 20 Aug 2002.
  16. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
  17. Ewing, Bradley T. & Wunnava, Phanindra V., 2001. "Unit roots and structural breaks in North American unemployment rates," The North American Journal of Economics and Finance, Elsevier, vol. 12(3), pages 273-282, November.
  18. Roed, Knut, 1997. " Hysteresis in Unemployment," Journal of Economic Surveys, Wiley Blackwell, vol. 11(4), pages 389-418, December.
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