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Unemployment Persistence: Does the Size of the Shock Matter?


  • Zoega, Gylfi


This paper is an empirical investigation of unemployment rate series in 17 countries. The timing and size of shifts in the mean rate of unemployment are estimated. The size of the shifts and the remaining persistence in the unemployment rate series are then related to institutional differences between the countries. The observed persistence in the unemployment hysteresis arises following large shocks to unemployment, but not following small changes. These results pose a challenge to theorists since none of the existing models of hysteresis have this property.

Suggested Citation

  • Zoega, Gylfi, 1994. "Unemployment Persistence: Does the Size of the Shock Matter?," CEPR Discussion Papers 1082, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1082

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    References listed on IDEAS

    1. Quah, Danny & Vahey, Shaun P, 1995. "Measuring Core Inflation?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1130-1144, September.
    2. Francis Breedon & Ian Twinn, 1995. "Valuation of underwriting agreements for UK rights issues: evidence from the traded option market," Bank of England working papers 39, Bank of England.
    3. Andy Haldane & Bennett McCallum & Chris Salmon, 1996. "Base Money Rules in the UK," Bank of England working papers 45, Bank of England.
    4. Roger Beaton & Paul Fisher, 1995. "The Construction of RPIY," Bank of England working papers 28, Bank of England.
    5. Joanna Paisley & Chris Salmon, 1995. "How Cyclical is the PSBR?," Bank of England working papers 34, Bank of England.
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    More about this item


    Equilibrium Unemployment; Hysteresis; Macroeconomic Policy; Shifting Mean Value Model; World Unemployment;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises


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