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Is It the Natural Rate Hypothesis or the Hysteresis Hypothesis for Unemployment Rates in Newly Industrialized Economies?

Author

Listed:
  • Nsenga Dieu

    (Nelson Mandela University, Department of Economics, Faculty of Business and Economic Studies, Port Elisabeth, South Africa)

  • Nach Mirada

    (Nelson Mandela University, Department of Economics, Faculty of Business and Economic Studies, Port Elisabeth, South Africa)

  • Khobai Hlalefang

    (Ph.D., Senior lecturer, North West University, Department of Economics, Faculty of Economic and Management Sciences, Port Elisabeth, South Africa)

  • Moyo Clement

    (Ph.D., post-doctorate researcher, Nelson Mandela University, Department of Economics, Faculty of Business and Economic Studies, Port Elisabeth South Africa)

  • Phiri Andrew

    (Ph.D., Senior lecturer, Nelson Mandela University, Department of Economics, Faculty of Business and Economic Studies, Port Elisabeth, South Africa)

Abstract

The focus of our study is on determining whether unemployment rates in 8 New Industrialized Economies conform to the natural rate hypothesis or the hysteresis hypothesis. To this end, we employ a variety of unit of unit root testing procedures to quarterly data collected between 2002:q1 and 2017:q1. Summarizing of our findings, conventional unit root tests which account neither for asymmetries nor structural breaks produce the most inconclusive results. On the other hand, tests which incorporate structural breaks while ignoring asymmetries tends to favour the natural rate hypothesis for our panel of countries. However, simultaneously accounting for asymmetries and unobserved structural breaks seemingly produces the most robust findings and confirms hysteresis in all unemployment rates except for Asian economies/countries of Thailand and the Philippines.

Suggested Citation

  • Nsenga Dieu & Nach Mirada & Khobai Hlalefang & Moyo Clement & Phiri Andrew, 2019. "Is It the Natural Rate Hypothesis or the Hysteresis Hypothesis for Unemployment Rates in Newly Industrialized Economies?," Comparative Economic Research, Sciendo, vol. 22(4), pages 39-55, December.
    • Handle: RePEc:vrs:coecre:v:22:y:2019:i:4:p:39-55:n:3
    DOI: 10.2478/cer-2019-0031
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    Cited by:

    1. Asiya Maskaeva & Mgeni Msafiri, 2021. "Youth unemployment hysteresis in South Africa: Macro-micro analysis," WIDER Working Paper Series wp-2021-20, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    natural rate hypothesis; hysteresis hypothesis; unemployment; unit root tests; Fourier function approximation; newly industrialized economies;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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