Complex Remanence vs. Simple Persistence: Are Hysteresis and Unit-Root Processes Observationally Equivalent?

Causes and Consequences of Hysteresis: Aggregate Demand, Productivity and Employment

“…The obvious dissatisfaction with the (linear) unit-root process approach is currently bringing a revival of the importance of the detection of nonlinearities in empirical macroeconomics: so, for example, Beaudry et al (2016) examining a few empirical time series, like unemployment and working hours, do find evidence of cyclical recurrent patterns not detectable when estimating auto-regressive linear stochastic models, therefore questioning the widespread use of such methods. However, the critique to the unit-root process approach is deeper and concerns the very underlying theory: as suggested by Piscitelli et al (2000), Hallett and Piscitelli (2002), Amable et al (2004) and Bassi and Lang (2016), genuine models of hysteresis should embed a nonlinear structure. According to Piscitelli et al (2000), three features characterise the memory of hysteretic processes, namely, non-linearity, selectivity, remanence.…”

“…As we shall briefly discuss below, there are different notions of hysteresis. Basically, they boil down to three different interpretations of the phenomenon (more in Piscitelli et al, 2000, Hallett and Piscitelli, 2002, Amable et al, 2004. The first is formulated in terms of the persistence in the deviations from some equilibrium path; the second is defined as a random-walk dynamics in equilibrium itself; the third, we believe a more genuine one, is in terms of the heterogeneous and non-linear responses of a system characterised by multiple equilibria or path-dependent trajectories.…”

Investment hysteresis and potential output: A post-Keynesian–Kaleckian agent-based approach

“…The rate of capital accumulation as a function of the rate of utilization.6 The model inAmable et al (2004) is a model of international trade with the exchange…”

Convergence in West German Regional Unemployment Rates

“…The multiple equilibria manifest in non-linear, non-stationary behavior of unemployment, which in turn displays a high degree of persistence, e.g. unit-root or close to unit-root behavior (see Amable et al, 1994Amable et al, , 2004Blanchard and Summers, 1989;Roed, 1997). Instead of testing for high persistency, a more direct approach would be a test for structural breaks that represent endogenous shifts from one equilibrium to the other, as for example in the 'coconut' model of Diamond (1982).…”

“…Hence, one may argue that taking literally the linear model for the differences implies that non-stationarity cannot take the form of a unit-root property of u i . If u i is non-stationary, this must stem from a more complicated non-linear dynamics that is path dependent (see Amable et al, 1994Amable et al, , 2004.…”