Testing hysteresis effect in U.S. state unemployment: new evidence using a nonlinear quantile unit root test

Bahmani‐Oskooee, Mohsen; Chang, Tsangyao; Ranjbar, Omid

doi:10.1080/13504851.2017.1316477

Cited by 21 publications

(11 citation statements)

References 11 publications

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“…Confirmation of the natural rate hypothesis for 45 states indicates that labour markets in those states are less regulated and more flexible, and deviations from the natural rate are just temporary and eventually will die out. Besides, from a policy perspective, the fact that unemployment rates in many states are stationary or mean-reverting supports discretionary policies implemented by the US Federal and states governments as well as those by the Federal Reserve Bank (Bahmani-Oskooee et al, 2018). In addition, the presence of stationary unemployment series implies that some macroeconomic variables linked to unemployment rate via flow-on effects will not inherit that non-stationarity and transmit it to major economic variables, e.g., inflation rate (Lee & Chang, 2008).…”

Section: Results From Empirical Analysismentioning

confidence: 99%

“…They obtained much stronger evidence for the hysteresis effect when Great Recession data were included. Finally, a recent study by Bahmani-Oskooee et al (2017) revisited the hysteresis hypothesis by using a nonlinear quantile unit root test for the US states from 1976:M1 to 2016:M7 based on monthly data. Their results indicated that 19 out of 52 states display hysteresis behaviour and the remaining 33 states followed different types of behaviour.…”

Section: A Brief Literature Reviewmentioning

confidence: 99%

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Testing the hysteresis effect in the US state-level unemployment series

Omay

Özcan

Shahbaz

2020

Journal of Applied Economics

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This paper re-examines the stochastic time series behaviour of the monthly unemployment rate in 50 states of the United States (US) for the period 1976-2017 using a number of state-of-the-art unit root tests. The new developments incorporate structural break, nonlinearity, asymmetry, and cross-sectional correlation within panel-data estimation including the use of a sequential panel selection method. While not previously considered, sequential panel selection enabled us to determine and separate the stationary and nonstationary series in the sample. The empirical findings are in support of the stationarity of unemployment rate in 47 states. The findings confirm a natural rate hypothesis for the labour markets in the most US states, indicating that labour market shocks have solely temporary effects on state-level unemployment. This empirical study provides significant state-specific policy implications.

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Section: Results From Empirical Analysismentioning

confidence: 99%

Section: A Brief Literature Reviewmentioning

confidence: 99%

Testing the hysteresis effect in the US state-level unemployment series

Omay

Özcan

Shahbaz

2020

Journal of Applied Economics

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“…As we observe from the table, UR studies refute hysteresis most of the time, with the exception of Arestis and Mariscal (2000), Cheng et.al. (2011) (only during GR), Bahmani-Oskooee et al (2018). Interestingly econometric estimations of the five structural models produce evidence in favor of hysteresis spanning a period through 1953-2015.…”

Section: Empirical Studies On Hysteresismentioning

confidence: 91%

ABD İşgücü Piyasasında Histeresi Etkisi Üzerine Ampirik Bir Çalışma: Yeni Keynesyen Ücret Phillips Eğrisi (1990-2014)

Baştav¹

2019

Sosyoekonomi

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This study investigates the concept of hysteresis for the US economy vs natural rate hypothesis during (1990:Q1-2014:Q4). Mainstream economics accepts the natural rate in the long run vs high and persistent unemployment idea of hysteresis. Unit root tests detect the nonstationarity of (un)employment series which may indicate hysteresis. Next, macroeconomic background is presented, and human capital or insider-outsider approaches are explained. With the (NKWPC) model, wage inflation is estimated with (un)employment variables and further with the output gap and growth of excess demand. Results reveal no hysteresis patterns except with the rate of change (ROC) of output during 2001 recession. Demand shocks or labour market factors may be causing nonstationarity of (un)employment according to which economic policy choice should be made regarding: demand management policies vs. labour market measures.

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“…Our empirical findings support the hysteresis hypothesis (potential GDP is difference-stationary around a changing mean) and suggest that the 1982 debt crisis and 2000 recession should be considered moments when the Mexican economy suffered persistent structural changes that permanently lowered the level of potential GDP, i.e., hysteresis. It is interesting to note that most empirical works on hysteresis concentrate on non-rejection of the null hypothesis as being evidence of hysteresis (see, inter alia, Akdoğan, 2017;Bahmani-Oskooee, Chang, & Ranjbar, 2018;Furuoka, 2017;García-Cintado, Romero-Ávila, & Usabiaga, 2015). A notable exception can be found in Meng, Strazicich, and Lee (2017), who affirm that deterministic shifts in an otherwise stationary process should also be considered evidence of hysteresis (the structuralist hypothesis).…”

Section: Introductionmentioning

confidence: 99%

Recessions and potential GDP: The case of Mexico

Ventosa‐Santaulària

Hernández‐Román

Amezcua³

2020

Bulletin of Econ Res

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There is growing evidence that deep recessions may have a permanent and negative impact on both the level and growth rate of the actual and potential GDP of developed economies in the medium and long term. We study the growth rate of the potential GDP of Mexico, a middle-income economy, using a modified version of the methodology proposed by Ball (2014) that employs robust time-series techniques to identify shifts and accounts for a diminishing growth rate caused by secular forces rather than crises. We find evidence in favour of the growth rate's being stable around a changing mean. On the one hand, the 1982 debt crisis and 2000 recession coincide with structural changes in the Mexican economy that had a lasting impact (on growth) and permanently lowered potential GDP levels, i.e., strong evidence in favour of the hysteresis hypothesis. On the other, we find no significant damaging effect (on potential GDP) of either the 1995 financial crisis or the Great Recession.

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Testing hysteresis effect in U.S. state unemployment: new evidence using a nonlinear quantile unit root test

Cited by 21 publications

References 11 publications

Testing the hysteresis effect in the US state-level unemployment series

Testing the hysteresis effect in the US state-level unemployment series

ABD İşgücü Piyasasında Histeresi Etkisi Üzerine Ampirik Bir Çalışma: Yeni Keynesyen Ücret Phillips Eğrisi (1990-2014)

Recessions and potential GDP: The case of Mexico

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