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Hysteresis in unemployment: Fact or fiction?

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  • Srinivasan, Naveen
  • Mitra, Pratik

Abstract

A stylized fact of European unemployment dynamics is one of extreme persistence and possible unit root behavior. This has led to a major reconsideration of the natural rate paradigm. We apply the Kalman filter to estimate the natural rate of unemployment for Germany and France. When the moving natural rate model is tested against the alternative of a unit root process, the unit root hypothesis is resoundingly rejected.

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  • Srinivasan, Naveen & Mitra, Pratik, 2012. "Hysteresis in unemployment: Fact or fiction?," Economics Letters, Elsevier, vol. 115(3), pages 419-422.
    • Handle: RePEc:eee:ecolet:v:115:y:2012:i:3:p:419-422
    DOI: 10.1016/j.econlet.2011.12.070
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    References listed on IDEAS

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    2. OlaOluwa S. Yaya & Ahamuefula E. Ogbonna & Robert Mudida, 2019. "Hysteresis of unemployment rates in Africa: new findings from Fourier ADF test," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(6), pages 2781-2795, November.
    3. Abhiruchi Rathi & Naveen Srinivasan, 2020. "The Unnatural Rate of Unemployment: Reflections on the Barro-Gordon and Natural Rate Paradigms," Working Papers 2020-191, Madras School of Economics,Chennai,India.
    4. Juan carlos Cuestas & Barry Harrison, 2014. "Unemployment hysteresis in the EU15: Has anything changed?," Economics Bulletin, AccessEcon, vol. 34(4), pages 2308-2314.
    5. Puigvert Jonathan & Juárez-Torres Miriam, 2019. "Labour Force Participation and the Business Cycle in Mexico," Working Papers 2019-04, Banco de México.
    6. Monge, Manuel, 2021. "U.S. historical initial jobless claims. Is it different with the coronavirus crisis? A fractional integration analysis," International Economics, Elsevier, vol. 167(C), pages 88-95.
    7. Saša Obradoviæ & Lela Ristiæ & Nemanja Lojanica, 2018. "Are unemployment rates stationary for SEE10 countries? Evidence from linear and nonlinear dynamics," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(2), pages 559-583.

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    More about this item

    Keywords

    Hysteresis; Natural rate of unemployment; Kalman filter;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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