Unemployment, Hysterisis and Transition
We quantify the degree of persistence in the unemployment rates of transition countries using a variety of methods benchmarked against the EU. In doing so, we will also characterize the dynamic behavior of unemployment in the CEECs during the past decade. In part of the paper, we will work with the concept of linear ÒHysteresisÓ as described by the presence of unit roots in unemployment as in most empirical research on this area. Given that this is potentially a rather narrow definition, we will also take into account the existence of structural breaks and non-linear dynamics in unemployment in order to allow for a richer set of dynamics. Finally, we examine whether CEECsÕ unemployment presents features of multiple equilibria, that is, if it remains locked into a new level whenever a structural change occurs. Our findings show that, in general, we can reject the unit root hypothesis after controlling for structural changes and business cycle effects, but we can observe the presence of a high and low unemployment equilibria. The speed of adjustment is faster for CEECs than the EU, although CEECs tend to move more frequently between equilibria.
|Date of creation:||04 Jun 2003|
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- Bianchi, Marco & Zoega, Gylfi, 1995.
"Unemployment Persistence : Does the Size of the Shock Matter ?,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1995014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Marco Bianchi & Gylfi Zoega, 1998. "Unemployment persistence: does the size of the shock matter?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(3), pages 283-304.
- Zoega, Gylfi, 1994. "Unemployment Persistence: Does the Size of the Shock Matter?," CEPR Discussion Papers 1082, C.E.P.R. Discussion Papers.
- Marco Bianchi & Gylfi Zoega, 1996. "Unemployment persistence: Does the size of the shock matter?," Bank of England working papers 50, Bank of England.
- Philippe Aghion & Olivier J. Blanchard, 1994.
"On the Speed of Transition in Central Europe,"
in: NBER Macroeconomics Annual 1994, Volume 9, pages 283-330
National Bureau of Economic Research, Inc.
- Blanchard, Olivier Jean & Aghion, Philippe, 1994. "On the Speed of Transition in Central Europe," Scholarly Articles 4481322, Harvard University Department of Economics.
- Aghion, P. & Blanchard, O.J., 1993. "On the Speed of Transition in Central Europe," Working papers 93-8, Massachusetts Institute of Technology (MIT), Department of Economics.
- Arestis, Philip & Biefang-Frisancho Mariscal, Iris, 1999. "Unit roots and structural breaks in OECD unemployment," Economics Letters, Elsevier, vol. 65(2), pages 149-156, November.
- Blanchard, Olivier & Wolfers, Justin, 2000.
"The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence,"
Royal Economic Society, vol. 110(462), pages 1-33, March.
- Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
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