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Asymmetric and time-varying error-correction: an application to labour demand in the UK

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  • Burgess, Simon M.
  • Escribano, Álvaro
  • Pfann, Gerard A.

Abstract

In this paper we compare the asymmetric and time-varying error-correction models that have recently been proposed, and apply these to the case of UK aggregate labour demand. The aim of the paper is to investigate the possible co-existence of time-varying adjustment on the one hand, and constant asymmetric error-correction on the other hand. We find that without allowing for time-varying adjustment variables, the asymmetric error-correction models of Granger and Lee (1989) and Escribano (1986) work well. But once the time-varying adjustment variables are included, the evidence for time-invariant asymmetric adjustment is marginal.

Suggested Citation

  • Burgess, Simon M. & Escribano, Álvaro & Pfann, Gerard A., 1993. "Asymmetric and time-varying error-correction: an application to labour demand in the UK," DES - Working Papers. Statistics and Econometrics. WS 3681, Universidad Carlos III de Madrid. Departamento de Estadística.
    • Handle: RePEc:cte:wsrepe:3681
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    References listed on IDEAS

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    1. Granger, C W J & Lee, T H, 1989. "Investigation of Production, Sales and Inventory Relationships Using Multicointegration and Non-symmetric Error Correction Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages 145-159, Supplemen.
    2. Burgess, S M, 1992. "Nonlinear Dynamics in a Structural Model of Employment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages 101-118, Suppl. De.
    3. Burgess, Simon M, 1988. "Employment Adjustment in UK Manufacturing," Economic Journal, Royal Economic Society, vol. 98(389), pages 81-103, March.
    4. Escribano, A., 1987. "Error-correction systems: nonlinear adjustments to linear long-run relationships," LIDAM Discussion Papers CORE 1987030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Nickell, Stephen, 1985. "Error Correction, Partial Adjustment and All That: An Expository Note," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 119-129, May.
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    1. Mira, Santiago & Escribano, Álvaro, 1995. "Nonlinear time series models: consistency and asymptotic normality of nls under new conditions," DES - Working Papers. Statistics and Econometrics. WS 6202, Universidad Carlos III de Madrid. Departamento de Estadística.

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