Hysteresis in West German Unemployment Reconsidered
The view that high unemployment in West Germany and other European countries is caused by a path dependence effect - or "hysteresis" effect - is quite popular among economists. However, because of an identification problem, much of the empirical evidence for this hypothesis is not fu lly convincing. This paper suggests a testing procedure that overcomes this problem. It is argued that in a cointegration framework it is reasonable to define hysteresis as the absence of weak exogeneity of the explanatory variables. Building on a cointeg ration model of the employment rate in West Germany, I find only weak evidence for hysteresis.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hargreaves Heap, S P, 1980. "Choosing the Wrong 'Natural' Rate: Accelerating Inflation or Decelerating Employment and Growth?," Economic Journal, Royal Economic Society, vol. 90(359), pages 611-20, September.
- Kalai, Ehud, 1977.
"Proportional Solutions to Bargaining Situations: Interpersonal Utility Comparisons,"
Econometric Society, vol. 45(7), pages 1623-30, October.
- Ehud Kalai, 1977. "Proportional Solutions to Bargaining Situations: Interpersonal Utility Comparisons," Discussion Papers 179, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Hyllerberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988.
"Seasonal Integration And Cointegration,"
0-88-2, Pennsylvania State - Department of Economics.
- Blanchard, Olivier Jean & Summers, Lawrence H, 1988. "Beyond the Natural Rate Hypothesis," American Economic Review, American Economic Association, vol. 78(2), pages 182-87, May.
- Richard Baldwin & Paul R. Krugman, 1986.
"Persistent Trade Effects of Large Exchage Rate Shocks,"
NBER Working Papers
2017, National Bureau of Economic Research, Inc.
- Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 635-654.
- Phelps, Edmund S & Zoega, Gylfi, 1998. "Natural-Rate Theory and OECD Unemployment," Economic Journal, Royal Economic Society, vol. 108(448), pages 782-801, May.
- Phillips, P C B, 1991.
"Optimal Inference in Cointegrated Systems,"
Econometric Society, vol. 59(2), pages 283-306, March.
- Carlin, Wendy & Soskice, David, 1990. "Macroeconomics and the Wage Bargain: A Modern Approach to Employment, Inflation, and the Exchange Rate," OUP Catalogue, Oxford University Press, number 9780198772446, December.
- Franses, Philip Hans, 1996. "Periodicity and Stochastic Trends in Economic Time Series," OUP Catalogue, Oxford University Press, number 9780198774549, December.
- Alogoskoufis, George & Manning, Alan, 1988. "Wage setting and unemployment persistence in Europe, Japan and the USA," European Economic Review, Elsevier, vol. 32(2-3), pages 698-706, March.
- Roed, Knut, 1997. " Hysteresis in Unemployment," Journal of Economic Surveys, Wiley Blackwell, vol. 11(4), pages 389-418, December.
- Lee, Hahn S. & Siklos, Pierre L., 1995. "A note on the critical values for the maximum likelihood (seasonal) cointegration tests," Economics Letters, Elsevier, vol. 49(2), pages 137-145, August.
- Peter C.B. Phillips & Bruce E. Hansen, 1988. "Statistical Inference in Instrumental Variables," Cowles Foundation Discussion Papers 869R, Cowles Foundation for Research in Economics, Yale University, revised Apr 1989.
- Manning, Alan, 1995. "Developments in Labour Market Theory and Their Implications for Macroeconomic Policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(3), pages 250-66, August.
- Francesco Giavazzi & Charles Wyplosz, 1985. "The Zero Root Problem: A Note on the Dynamic Determination of the Stationary Equilibrium in Linear Models," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 353-357.
- Olivier J. Blanchard & Lawrence H. Summers, 1986.
"Hysteresis and the European Unemployment Problem,"
NBER Working Papers
1950, National Bureau of Economic Research, Inc.
- Manning, Alan, 1993.
"Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations,"
Royal Economic Society, vol. 103(416), pages 98-118, January.
- Alan Manning, 1992. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," CEP Discussion Papers dp0062, Centre for Economic Performance, LSE.
- Bruno Amable & Jérôme Henry & Frédéric Lordon & Richard Topol, 1993. "Unit Root in the Wage-Price Spiral Is Not Hysteresis in Unemployment," Journal of Economic Studies, Emerald Group Publishing, vol. 20(1/2), pages 123-135, January.
- Franz, Wolfgang, 1990.
"Hysteresis in economic relationships: An overview,"
Discussion Papers, Series II
104, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
- Lee, Hahn Shik, 1992. "Maximum likelihood inference on cointegration and seasonal cointegration," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 1-47.
- Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
- Canova, Fabio & Hansen, Bruce E, 1995. "Are Seasonal Patterns Constant over Time? A Test for Seasonal Stability," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 237-52, July.
- Profit, Stefan & Tschernig, Rolf, 1998. "Germany's labor market problems: What to do and what not to do? A survey among experts," SFB 373 Discussion Papers 1998,94, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_240. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.