Is there really hysteresis in the OECD unemployment rates? New evidence using a Fourier panel unit root test

Abstract

We investigate the hysteresis hypothesis by proposing a heterogeneous panel unit root test that allows for gradually changing trends and cross-sectional dependence (CSD) among panel members using a flexible Fourier form. Inconclusive results from previous studies are potentially due to using very restrictive specifications with homogenous break structures and/or exogenously determined abrupt breaks. We seek to address these limitations by employing general specifications that are more capable of characterising the true data generation process of unemployment and by allowing for spill-over effects using a bootstrapping procedure to accommodate CSD that must be considered in a globalized world. Extensive simulations suggest that the failure to take structural breaks and CSD into account can lead to misleading conclusions about whether the unemployment rate is stationarity. We apply our test procedure to unemployment data for 23 OECD countries and find conclusive evidence against the hysteresis hypothesis for all these countries.

Assessing the Macroeconomic Consequences of External Financial Upheavals on China: A Caution of a Silicon Valley Bank’s Collapse

“…However, their study failed to fully recognize the interplay between industry-specific factors and economic downturns, thereby creating opportunities for further investigation into these interrelations. Such a recession could also impact labor markets, leading to decreased employment levels as companies grapple with falling demand and credit restrictions-a phenomenon well documented by Omay et al [17] and Yaya et al [18]. At the same time, these studies, while insightful, could benefit from a deeper examination of the resilience of labor markets in different countries, the role of social safety nets, and government response during crises.…”

Danimarka ve İsveç İçin İşsizlik Histerisi Hipotezinin Test Edilmesi

“…The study of Blanchard and Summers (1986) is at the forefront of the empirical studies on unemployment hysteresis. Apart from this study, other examined empirical studies are as follows: Brunello (1990), Neudorfer et al (1990), Jaeger and Parkinson (1994), Røed (1996), Song and Wu (1997), Arestis and Mariscal (1999), Papell et al (2000), León-Ledesma (2002), Camarero and Tamarit (2004), Camarero et al (2006), Gustavsson and Österholm (2006), Camarero et al (2008), Gomes and Da Silva (2008), Lee and Chang (2008), Lee et al (2009), Lee (2010), Chang (2011), Ayala et al (2012), Cevik and Dibooglu (2013), Lee et al (2013), Bakas and Papapetrou (2014), Cheng et al (2014), Furuoka (2014), Tiwari (2014), Jiang and Chang (2016), Akdoğan (2017), Güriş et al (2017), Meng et al (2017), Bahmani-Oskooee et al (2018), Rodriguez-Gil (2018), Yaya et al (2019), Khraief et al (2020), Omay et al (2020), Yilanci et al (2020), Omay et al (2021), Bostancı and Koç (2022), Caporale et al (2022),…”

A long-run convergence analysis of aerosol precursors, reactive gases, and aerosols in the BRICS and Indonesia: is a global emissions abatement agenda supported?

“…The latter type includes Leybourne et al ( 1998 )—LNV hereafter—and Enders and Lee ( 2012 )—EL hereafter—who develop nonlinear structural-break unit-root tests that allow for a single permanent break through a logistic smooth transition function and multiple smooth changes through a flexible Fourier function, respectively. More recently, four respective panel versions of these univariate unit root tests have been developed, which are the ones we employ: the tests of Uçar and Omay ( 2009 )—UO hereafter—Emirmahmutoglu and Omay ( 2014 )—EO hereafter—Omay et al ( 2018b )—OHS hereafter—and Omay et al ( 2021 )—OSS hereafter.…”