Unemployment Persistence : Does the Size of the Shock Matter ?
One of the stylized facts of unemployment is that shifts in its mean rate between decades and half-decades account for most of its variance. In this paper, we use a purely statistical analysis based on nonparametric densitity estimation techniques to identify the dates of infrequent changes in the mean of the unemployment rate series of seventeen countries. We find that in most countries, unemployment persistence is small one the (infrequently) changing mean rate has been removed. The changes in the mean rate coincide with the largest single annual changes in actual unemployment. We conclude that the observed persistence in unemployment appears to be consistent with hysteresis models which explain why unemployment hysteresis arises following large shocks to unemployment, but not following small changes. The result poses a challenge to theorist since existing hysteresis models do not have this non-linearity property.
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|Date of creation:||01 Jan 1995|
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- Quah, Danny & Vahey, Shaun P, 1995.
"Measuring Core Inflation?,"
Royal Economic Society, vol. 105(432), pages 1130-1144, September.
- Danny Quah & Shaun Vahey, 1995. "Measuring Core Inflation," Bank of England working papers 31, Bank of England.
- Danny Quah & Danny Quah & Shaun P. Vahey, 1995. "Measuring Core Inflation," CEP Discussion Papers dp0254, Centre for Economic Performance, LSE.
- Roger Beaton & Paul Fisher, 1995. "The Construction of RPIY," Bank of England working papers 28, Bank of England.
- Joanna Paisley & Chris Salmon, 1995. "How Cyclical is the PSBR?," Bank of England working papers 34, Bank of England.
- 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.
- Andy Haldane & Bennett McCallum & Chris Salmon, 1996. "Base Money Rules in the UK," Bank of England working papers 45, Bank of England.
- Quah, Danny & Vahey, Shaun P, 1995. "Measuring Core Inflation?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1130-1144, September.
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