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Unemployment Hysteresis in Transition Countries: Evidence using Stationarity Panel Tests with Breaks

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  • Mariam Camarero
  • Josep Lluís Carrion‐i‐Silvestre
  • Cecilio Tamarit

Abstract

The authors test hysteresis versus the natural rate hypothesis in unemployment using panel data for transition countries covering the period 1991:1–2003:11. The advantages of the stationarity tests applied is that they exploit the cross‐section variations of the series and, additionally, allow for a different number of endogenous breakpoints in the unemployment series. They do not impose independence on the panel members, so that the critical values are simulated based on their specific panel sizes and time periods. The findings stress the importance of accounting for exogenous shocks in the series and give support to the shifting natural‐rate hypothesis of unemployment for all the countries analyzed.

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  • Mariam Camarero & Josep Lluís Carrion‐i‐Silvestre & Cecilio Tamarit, 2008. "Unemployment Hysteresis in Transition Countries: Evidence using Stationarity Panel Tests with Breaks," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 620-635, August.
    • Handle: RePEc:bla:rdevec:v:12:y:2008:i:3:p:620-635
    DOI: 10.1111/j.1467-9361.2008.00476.x
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    Cited by:

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    3. Jakub Bechný, 2019. "Unemployment Hysteresis in the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(5), pages 532-546.
    4. Ferit KULA & Alper ASLAN, 2014. "Unemployment Hysteresis in Turkey: Does Education Matter?," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 35-39.
    5. Giray Gozgor, 2013. "Testing Unemployment Persistence in Central and Eastern European Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 3(3), pages 694-700.
    6. Puigvert Jonathan & Juárez-Torres Miriam, 2019. "Labour Force Participation and the Business Cycle in Mexico," Working Papers 2019-04, Banco de México.
    7. Fosten, Jack & Ghoshray, Atanu, 2011. "Dynamic persistence in the unemployment rate of OECD countries," Economic Modelling, Elsevier, vol. 28(3), pages 948-954, May.
    8. Vuyokazi Pikoko & Andrew Phiri, 2019. "Is There Hysteresis in South African Unemployment? Evidence from the Post-Recessionary Period," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 15(3), pages 365-387, JUNE.
    9. Tolga Omay & Muhammad Shahbaz & Chris Stewart, 2021. "Is there really hysteresis in the OECD unemployment rates? New evidence using a Fourier panel unit root test," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(4), pages 875-901, November.
    10. 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.
    11. Ming Meng & Mark C. Strazicich & Junsoo Lee, 2017. "Hysteresis in unemployment? Evidence from linear and nonlinear unit root tests and tests with non-normal errors," Empirical Economics, Springer, vol. 53(4), pages 1399-1414, December.
    12. Juan Carlos Cuestas & Javier Ordonez, 2011. "Unemployment and common smooth transition trends in Central and Eastern European Countries," Economic Issues Journal Articles, Economic Issues, vol. 16(2), pages 39-52, September.
    13. Cuestas, Juan C. & Gil-Alana, Luis A. & Staehr, Karsten, 2011. "A further investigation of unemployment persistence in European transition economies," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 514-532.
    14. Ghoshray, Atanu & Stamatogiannis, Michalis P., 2015. "Centurial evidence of breaks in the persistence of unemployment," Economics Letters, Elsevier, vol. 129(C), pages 74-76.
    15. Qaiser Munir & Sook Ching Kok & Kasim Mansur, 2019. "External Shocks, Structural Breaks And Unemployment Hysteresis In Selected Asian Countries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(03), pages 575-600, June.
    16. 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.
    17. Ömer AKKUŞ & Seher Gülşah TOPUZ, 2019. "Validity of Unemployment Hysteresis: The Most Fragile Five Developing Countries," Sosyoekonomi Journal, Sosyoekonomi Society, issue 27(39).
    18. repec:prg:jnlpep:v:preprint:id:709:p:1-15 is not listed on IDEAS
    19. Kula Ferit & Aslan Alper, 2010. "Hysteresis vs. Natural Rate of Unemployment: One, the Other, or Both?," South East European Journal of Economics and Business, Sciendo, vol. 5(1), pages 91-94, April.
    20. Juan Carlos Cuestas & Luis A. Gil-Alana, 2009. "Unemployment hysteresis, structural changes, non-linearities and fractional integration in Central and Eastern Europe," NBS Discussion Papers in Economics 2009/6, Economics, Nottingham Business School, Nottingham Trent University.
    21. Rusinova, Desislava & Lipatov, Vilen & Heinz, Frigyes Ferdinand, 2015. "How flexible are real wages in EU countries? A panel investigation," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 140-154.
    22. Juan Carlos Cuestas & Luis A. Gil-Alana, 2011. "Unemployment hysteresis, structural changes, non-linearities and fractional integration in European transition economies," Working Papers 2011005, The University of Sheffield, Department of Economics, revised Feb 2011.

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