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Dynamic persistence in the unemployment rate of OECD countries
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Fosten, Jack and Ghoshray, Atanu (2011) Dynamic persistence in the unemployment rate of OECD countries. Economic Modelling, Volume 28 (Number 3). pp. 948-954. doi:10.1016/j.econmod.2010.11.007 ISSN 0264-9993.
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Official URL: http://dx.doi.org/10.1016/j.econmod.2010.11.007
Abstract
Previous studies use a variety of increasingly advanced unit root tests to determine whether Blanchard and Summers (1986) hysteresis theory of unemployment or the classical 'natural' rate theory of Friedman (1968) and Phelps (1967, 1968) is most relevant for a given country. However these tests all specify a unit root under the null hypothesis against a stationary alternative, such as in the paper by Lee and Chang (2008), making the two theories of unemployment mutually exclusive over the sample period. This paper moves away from this dichotomy by allowing for switches between hysteresis and the natural rate theory using the recently developed test of Leybourne, Kim and Taylor (2007). We find that in countries like the United Kingdom, the natural rate theory is detected in the post-World War Two period of stabilisation: the time leading up to the seminal works of Friedman and Phelps. Hysteresis is found over the First World War and Great Depression periods, and in the period from the 1970s; a time characterised by rising trade union power. We also compute numerical measures of persistence using grid-bootstrap estimates of the autoregressive parameter, following Hansen (1999). (C) 2010 Elsevier B.V. All rights reserved.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor |
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Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Unemployment -- OECD countries, Hysteresis (Economics), Time-series analysis, Econometrics | ||||
Journal or Publication Title: | Economic Modelling | ||||
Publisher: | Elsevier | ||||
ISSN: | 0264-9993 | ||||
Official Date: | 2011 | ||||
Dates: |
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Volume: | Volume 28 | ||||
Number: | Number 3 | ||||
Page Range: | pp. 948-954 | ||||
DOI: | 10.1016/j.econmod.2010.11.007 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published |
Data sourced from Thomson Reuters' Web of Knowledge
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