IDEAS home Printed from https://ideas.repec.org/p/itt/wpaper/wp2010-10.html
   My bibliography  Save this paper

Unemployment and Hysteresis: A Nonlinear Unobserved Components A Nonlinear Unobserved Components A Nonlinear Unobserved Components A Nonlinear Unobserved Components A Nonlinear Unobserved Components Approach

Author

Listed:
  • Silvestro DI SANZO
  • Alicia PEREZ-ALONSO

Abstract

A new test for hysteresis based on a nonlinear unobserved components model is proposed. Observed unemployment rates are decomposed into a natural rate component and a cyclical component. Threshold type nonlinearities are introduced by allowing past cyclical unemployment to have a different impact on the natural rate depending onthe regime of the economy. The impact of lagged cyclical shocks on thecurrent natural component is the measure of hysteresis. To derive anappropriate p-value for a test for hysteresis two alternative bootstrapalgorithms are proposed: the first is valid under homoskedastic errorsand the second allows for heteroskedasticity of unknown form. A MonteCarlo simulation study shows the good performance of both bootstrapalgorithms. The bootstrap testing procedure is applied to data fromItaly, France and the United States. We find evidence of hysteresis forall countries under study.

Suggested Citation

  • Silvestro DI SANZO & Alicia PEREZ-ALONSO, "undated". "Unemployment and Hysteresis: A Nonlinear Unobserved Components A Nonlinear Unobserved Components A Nonlinear Unobserved Components A Nonlinear Unobserved Components A Nonlinear Unobserved Components A," Working Papers wp2010-10, Department of the Treasury, Ministry of the Economy and of Finance.
    • Handle: RePEc:itt:wpaper:wp2010-10
    as

    Download full text from publisher

    File URL: http://www.dt.tesoro.it/export/sites/sitodt/modules/documenti_it/analisi_progammazione/working_papers/Unemployment_and_Hysteresis_a_nonlinear_Unobserved_Components_Approach.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Knut Røed, 1997. "Hysteresis in Unemployment," Journal of Economic Surveys, Wiley Blackwell, vol. 11(4), pages 389-418, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Elisabeth Lopez-Perez & Ana Rodriguez-Santiago & Emilio Congregado, 2020. "Persistence in Self-Employment Rates before the Great Lockdown: The Case of the UK," Sustainability, MDPI, vol. 12(16), pages 1-13, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Engelbert Stockhammer & Simon Sturn, 2012. "The impact of monetary policy on unemployment hysteresis," Applied Economics, Taylor & Francis Journals, vol. 44(21), pages 2743-2756, July.
    2. Kurmaş Akdoğan, 2017. "Unemployment hysteresis and structural change in Europe," Empirical Economics, Springer, vol. 53(4), pages 1415-1440, December.
    3. Mariam Camarero & Josep Lluís Carrion-i-Silvestre & Cecilio Tamarit, 2004. "Testing for hysteresis in unemployment in OECD countries. New evidence using stationarity panel tests with breaks†," Economic Working Papers at Centro de Estudios Andaluces 2004/40, Centro de Estudios Andaluces.
    4. S. Haincourt. & M. Mogliani., 2012. "Has the 2008-2009 recession increased the structural share of unemployment in the euro area?," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 25, pages 63-80, Spring.
    5. Aysegul Corakci & Tolga Omay & Mübariz Hasanov, 2022. "Hysteresis and stochastic convergence in Eurozone unemployment rates: evidence from panel unit roots with smooth breaks and asymmetric dynamics," Oeconomia Copernicana, Institute of Economic Research, vol. 13(1), pages 11-55, March.
    6. Matteo Lanzafame, 2010. "The nature of regional unemployment in Italy," Empirical Economics, Springer, vol. 39(3), pages 877-895, December.
    7. Magnus Gustavsson & Pär Österholm, 2010. "The presence of unemployment hysteresis in the OECD: what can we learn from out-of-sample forecasts?," Empirical Economics, Springer, vol. 38(3), pages 779-792, June.
    8. Mariam Camarero & Josep Lluís Carrion‐i‐Silvestre & Cecilio Tamarit, 2006. "Testing for Hysteresis in Unemployment in OECD Countries: New Evidence using Stationarity Panel Tests with Breaks," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(2), pages 167-182, April.
    9. Bayer Christian & Jüßen Falko, 2007. "Convergence in West German Regional Unemployment Rates," German Economic Review, De Gruyter, vol. 8(4), pages 510-535, December.
    10. Maxim Ananiev & Sergei Guriev, 2014. "The Effect of Income on Trust: the Evidence from 2009 Crisis in Russia," Working Papers hal-03429914, HAL.
    11. Pérez-Alonso Alicia & Di Sanzo Silvestro, 2010. "Unemployment and Hysteresis: A Nonlinear Unobserved Components Approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 15(1), pages 1-29, December.
    12. Schneider, Nicolas & Strielkowski, Wadim, 2023. "Modelling the unit root properties of electricity data—A general note on time-domain applications," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 618(C).
    13. Giorgio Canarella & Rangan Gupta & Stephen M. Miller & Stephen K. Pollard, 2019. "Unemployment rate hysteresis and the great recession: exploring the metropolitan evidence," Empirical Economics, Springer, vol. 56(1), pages 61-79, January.
    14. Jean françois Hoarau & Claude Lopez & Michel Paul, 2010. "Short Note on the Unemployment Rate of the “French overseas regions”," Economics Bulletin, AccessEcon, vol. 30(3), pages 2321-2329.
    15. Robert Calvert Jump & Paul Levine, 2021. "Hysteresis in the New Keynesian three equation model," School of Economics Discussion Papers 0821, School of Economics, University of Surrey.
    16. repec:hal:spmain:info:hdl:2441/8lt2edmul9geov3cf3fqf7h92 is not listed on IDEAS
    17. De-Chih Liu, 2011. "Hysteresis Hypothesis in Job Creation and Destruction: Evidence from the U.S," Annals of Economics and Finance, Society for AEF, vol. 12(2), pages 389-409, November.
    18. Magnus Gustavsson & Pär Österholm, 2007. "Does Unemployment Hysteresis Equal Employment Hysteresis?," The Economic Record, The Economic Society of Australia, vol. 83(261), pages 159-173, June.
    19. Alistair Dieppe & Jerome Henry & Peter Mc Adam, "undated". "Labour market dynamics in the euro area: A model-based sensitivity analysis," Modeling, Computing, and Mastering Complexity 2003 09, Society for Computational Economics.
    20. Kumar Narayan, Paresh & Smyth, Russell, 2007. "Are shocks to energy consumption permanent or temporary? Evidence from 182 countries," Energy Policy, Elsevier, vol. 35(1), pages 333-341, January.
    21. Hassler Uwe & Wolters Jürgen, 2009. "Hysteresis in Unemployment Rates? A Comparison between Germany and the US," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 119-129, April.

    More about this item

    Keywords

    Hysteresis; Unobserved Components Model; Threshold Autoregressive Models; Nuisance parameters; Bootstrap;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:itt:wpaper:wp2010-10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michele Petrocelli (email available below). General contact details of provider: https://edirc.repec.org/data/tesgvit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.