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Modelling the Behaviour of Unemployment Rates in the US over Time and across Space

  • Mark J. Holmes

    ()

    (Department of Economics, Waikato University, New Zealand)

  • Jesús Otero

    ()

    (Facultad de Economía, Universidad del Rosario, Colombia)

  • Theodore Panagiotidis

    ()

    (Department of Economics, University of Macedonia, Greece)

This paper provides evidence that unemployment rates across US states are stationary and therefore behave according to the natural rate hypothesis. We provide new insights by considering the effect of key variables on the speed of adjustment associated with unemployment shocks. A highly-dimensional VAR analysis of the half-lives associated with shocks to unemployment rates in pairs of states suggests that distance between states and vacancy rates respectively exert a positive and negative influence. We find that higher homeownership rates do not lead to higher half-lives. When the symmetry assumption is relaxed through quantile regression, support for the Oswald hypothesis through a positive relationship between homeownership rates and half-lives is found at the higher quantiles.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 39_13.

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Date of creation: Jul 2013
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Handle: RePEc:rim:rimwps:39_13
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