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Unemployment And Hysteresis: A Nonlinear Unobserved Components Approach

Author

Listed:
  • Alicia Pérez Alon

    (Universidad de Alicante)

  • Silvestro Di Sanzo

    (Universidad de Alicante)

Abstract

The aim of this paper is to find a possible hysteresis effect on unemployment rate series from Italy, France and the United States. We propose a definition of hysteresis taken from Physics which allows for nonlinearities. To test for the presence of hysteresis we use a nonlinear unobserved components model for unemployment series. The estimation methodology used can be assimilated into a threshold autoregressive representation in the framework of a Kalman filter. To derive an appropriate p-value for a test for hysteresis we propose two alternative bootstrap procedures: the first is valid under homoskedastic errors and the second allows for general heteroskedasticity. We investigate the performance of both bootstrap procedures using Monte Carlo simulation.

Suggested Citation

  • Alicia Pérez Alon & Silvestro Di Sanzo, 2005. "Unemployment And Hysteresis: A Nonlinear Unobserved Components Approach," Working Papers. Serie AD 2005-34, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2005-34
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    References listed on IDEAS

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    Cited by:

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    2. Canarella, Giorgio & Miller, Stephen M. & Nourayi, Mahmoud M., 2013. "Firm profitability: Mean-reverting or random-walk behavior?," Journal of Economics and Business, Elsevier, vol. 66(C), pages 76-97.
    3. Di Sanzo Silvestro & Bella Mariano, 2015. "Public debt and growth in the euro area: evidence from parametric and nonparametric Granger causality," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 631-648, July.
    4. Kurmaş Akdoğan, 2017. "Unemployment hysteresis and structural change in Europe," Empirical Economics, Springer, vol. 53(4), pages 1415-1440, December.
    5. Omay, Tolga & Shahbaz, Muhammad & Stewart, Chris, 2021. "Is There Really Hysteresis in OECD Countries’ Unemployment Rates? New Evidence Using a Fourier Panel Unit Root Test," MPRA Paper 107691, University Library of Munich, Germany, revised 10 May 2021.
    6. Guodong Li & Bo Guan & Wai Keung Li & Philip L. H. Yu, 2015. "Hysteretic autoregressive time series models," Biometrika, Biometrika Trust, vol. 102(3), pages 717-723.
    7. Kostenko Elena & Kuznichenko Vladimir M. & Lapshyn Vladimir I., 2013. "Influence of external periodic and non-linear factors upon stability of economic systems," The Problems of Economy, RESEARCH CENTRE FOR INDUSTRIAL DEVELOPMENT PROBLEMS of NAS (KHARKIV, UKRAINE), issue 2, pages 212-219.
    8. Emilio Congregado & Antonio Golpe & Simon Parker, 2012. "The dynamics of entrepreneurship: hysteresis, business cycles and government policy," Empirical Economics, Springer, vol. 43(3), pages 1239-1261, December.
    9. MeiChi Huang, 2020. "A threshold unobserved components model of housing bubbles: timings and effectiveness of monetary policies," Empirical Economics, Springer, vol. 59(2), pages 887-908, August.
    10. Martina Janková & Veronika Novotná & Tereza Varyšová, 2013. "Functions of several variables analysis applied in inventory management," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 61(7), pages 2221-2227.
    11. Robert Calvert Jump & Engelbert Stockhammer, 2019. "Reconsidering the natural rate hypothesis," FMM Working Paper 45-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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    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

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