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Modelling the US, the UK and Japanese unemployment rates. Fractional integrationand structural breaks

  • Luis A. Gil-Alana

    ()

    (Facultad de Ciencias Económicas y Empresariales, Universidad de Navarra)

  • Guglielmo M. Caporale

    ()

    (Brunel University, London, England)

A general procedure for fractional integration and structural breaks at unknown points in time is used, which allows for different orders of integration and deterministic components in each subsample. First, the procedure is extended to the non-linear case, and is showed by means of Monte Carlo experiments that it performs well in a non-linear environment. Second, it is applied to test for a single break in the unemployment rate in the US, the UK and Japan. The results shed some light on the empirical relevance of alternative unemployment theories for these countries. Specifically, a structuralist interpretation appears more appropriate for the US and Japan, whilst a hysteresis model accounts better for the UK experience (and also for the Japanese one in the second subsanple). These findings are interpreted in terms of structural instability in labour markets with different features.

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File URL: http://www.unav.edu/documents/10174/6546776/1227197843_WP_11_08_Alana_Caporale.pdf
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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 11/08.

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Length: 46 pages
Date of creation: 20 Nov 2008
Date of revision:
Publication status: Published in COMPUTATIONAL STATISTICS AND DATA ANALYSIS 52, 11, 4998-5013, 2008
Handle: RePEc:una:unccee:wp1108
Contact details of provider: Web page: http://www.unav.edu/web/facultad-de-ciencias-economicas-y-empresariales

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