Censored latent effects autoregression, with an application to US unemployment
A new time series model is proposed to describe observed asymmetries in postwar unemployment data. We assume that recession periods, when unemployment increases rapidly, are caused by unobserved positive shocks. The generating mechanism of these latent shocks is a censored regression model, where linear combinations of lagged explanatory variables lead to positive shocks, while otherwise shocks are equal to zero. We apply our censored latent effects autoregression [CLEAR] to monthly US unemployment, where the positive shocks are found to depend on lagged oil prices, industrial production, the term structure of interest rates and a stock market index. The model fits the data well, and its out-of-sample forecasts appear to outperform those from alternative models.
|Date of creation:||01 Jan 1998|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 31 10 4081111
Web page: http://www.eur.nl/ese
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.:
- Hamilton, James D., 1996. "Specification testing in Markov-switching time-series models," Journal of Econometrics, Elsevier, vol. 70(1), pages 127-157, January.
- Olivier J. Blanchard & Lawrence H. Summers, 1986.
"Hysteresis and the European Unemployment Problem,"
427, Massachusetts Institute of Technology (MIT), Department of Economics.
- Harvey, Campbell R., 1988. "The real term structure and consumption growth," Journal of Financial Economics, Elsevier, vol. 22(2), pages 305-333, December.
- Estrella, Arturo & Hardouvelis, Gikas A, 1991.
" The Term Structure as a Predictor of Real Economic Activity,"
Journal of Finance,
American Finance Association, vol. 46(2), pages 555-76, June.
- Arturo Estrella & Gikas A. Hardouvelis, 1989. "The term structure as a predictor of real economic activity," Research Paper 8907, Federal Reserve Bank of New York.
- Blanchard, Olivier J. & Summers, Lawrence H., 1987.
"Hysteresis in unemployment,"
European Economic Review,
Elsevier, vol. 31(1-2), pages 288-295.
- Skalin, Joakim & Teräsvirta, Timo, 1998.
"Modelling asymmetries and moving equilibria in unemployment rates,"
SSE/EFI Working Paper Series in Economics and Finance
262, Stockholm School of Economics, revised 05 Oct 1998.
- Skalin, Joakim & Ter svirta, Timo, 2002. "Modeling Asymmetries And Moving Equilibria In Unemployment Rates," Macroeconomic Dynamics, Cambridge University Press, vol. 6(02), pages 202-241, April.
- Balke, Nathan S & Fomby, Thomas B, 1994.
"Large Shocks, Small Shocks, and Economic Fluctuations: Outliers in Macroeconomic Time Series,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 9(2), pages 181-200, April-Jun.
- Nathan S. Balke & Thomas B. Fomby, 1991. "Large shocks, small shocks, and economic fluctuations: outliers in macroeconomic times series," Research Paper 9101, Federal Reserve Bank of Dallas.
- Marco Bianchi & Gylfi Zoega, 1996.
"Unemployment persistence: Does the size of the shock matter?,"
Bank of England working papers
50, Bank of England.
- 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.
- 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).
- Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, vol. 41(7), pages 1375-1401, July.
- Durland, J Michael & McCurdy, Thomas H, 1994.
"Duration-Dependent Transitions in a Markov Model of U.S. GNP Growth,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 12(3), pages 279-88, July.
- J. Michael Durland & Thomas H. McCurdy, 1993. "Duration Dependent Transitions in a Markov Model of U.S. GNP Growth," Working Papers 887, Queen's University, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:ems:eureir:1532. 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: (RePub)
If references are entirely missing, you can add them using this form.