Testing and Estimating Persistence in Canadian Unemployment
A vital implication of unemployment persistence applies to the Bank of Canada's disinflation policies since it adversely influences unemployment and considerably lengthens recessions. This paper tests for persistence in Canadian sectoral unemployment, using the modified rescaled-range test. Our results show evidence of persistence in sectoral unemployment that translates to persistence in aggregate unemployment. To quantify this aggregate-level persistence, we estimate it within the framework of Bayesian ARFIMA class of models. The results conclude that Canadian unemployment exhibits persistence in the short and intermediate run.
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