Unemployment hysteresis in the Eurozone area: evidences from nonlinear heterogeneous panel unit root test

Bolat, Süleyman; Tiwari, Aviral Kumar; Erdayi, Ahmet Utku

doi:10.1080/13504851.2013.872755

Cited by 26 publications

(13 citation statements)

References 27 publications

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“…Song and Wu (1998) highlights these implications with specific focus on the aftermaths of periods of recession, which are observed to have more costly influence on the rate of unemployment than the natural rate. Extant literature are, however, awash with studies that examine the stationarity of the unemployment rate across regions of the world and consequently, divided into two differing standpoints based on research findingsproponents of the hysteresis hypothesis (see Blanchard and Summer, 1986;Brunello, 1990;Mitchell, 1993;Jaeger and Parkinson, 1994;Chang 2011;García-Cintado et al, Although, some studies report mixed findings for both hysteresis hypothesis and the natural rate theory [non-accelerating inflation rate of unemployment (NAIRU)] (see Breuer et al, 2001;Bolat et al, 2014;Furuoka, 2015a,b;Furuoka, 2017a;Cekic, 2016;Dursum, 2017; among others).…”

Section: Review Of Literaturementioning

confidence: 99%

Hysteresis of unemployment rates in Africa: new findings from Fourier ADF test

2019

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We investigate unit root in the unemployment rates of 42 African countries. The essence is to clarify if the hypothesis of hysteresis holds or unemployment rate is dubbed as having natural rate, that is, stationarity. Having considered a novel approach that considers the nonlinear Fourier and a structural break in the unit root testing framework, we find the classical unit root test wrongly accepting the hysteresis hypothesis of unemployment rate in selected African countries more than 60% of the cases. Meanwhile, our approach finds fewer cases of hysteresis in the unemployment rate than initially detected by the conventional classical test: the hysteresis hypothesis is found to hold in only 7 countries (Algeria,

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Section: Review Of Literaturementioning

confidence: 99%

Hysteresis of unemployment rates in Africa: new findings from Fourier ADF test

2019

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“…'the majority of shocks to unemployment are temporary but, occasionally, and mainly associated with recessions, can provoke a change in the level of the natural rate of unemployment' (Camarero et al, 2006). Bolat, Tiwari, and Erdayi (2014) and Khraief, Shahbaz, Heshmati, and Azam (2015) have confirmed this theory for the OECD countries, when they have applied nonlinear unit root tests. The hysteresis hypothesis in unemployment is strongly rejected when structural changes and cross-section dependence are taken into consideration.…”

Section: Literature Reviewmentioning

confidence: 88%

Unemployment and Sectoral Competitiveness in Southern European Union Countries. Facts and Policy Implications

Dimian

Aceleanu

Ileanu

et al. 2018

Journal of Business Economics and Management

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This article addresses the problem of the main factors driving sectoral unemployment in the Mediterranean countries most affected by this phenomenon. The choice of the four countries (Greece, Italy, Spain and Portugal) relies on the fact that they are dealing with the highest unemployment rates in the European Union and a certain typology of the economic structure. The originality of our research is offered by its direction, less tackled until now, namely the focus on the particularities of the economic sectors, trying to capture differences between them. The importance and the impact of the results are supported by the methods used to produce them, indicators and econometric models that are on trend and bring extra information to available studies. Descriptive statistics and mismatch indexes are used to outline the economic and labour market structure, while the econometric models built on panel data capture the impact of factors such as GVA growth, specialization and labour market mismatches on the unemployment rate at six economic sectors level. Our paper makes three contributions to the literature. First, we have demonstrated that agriculture is the sector of activity less sensitive to output fluctuations in terms of unemployment and can become a buffer for the jobless in times of recessions. Second, we have proved that industry, as a whole, is highly responsive to economic developments and bad specialization could worsen unemployment situation in this sector. Third, we showed that educational mismatches have a significant impact on unemployment in those sectors of activity that employ low educated workforce.

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“…But Camarero et al (2006), on monthly data from 1991 to 2003 for nine European countries, found that hysteresis disappear once the unit root tests allow the existence of structural breaks. Bolat et al (2014) used a nonlinear panel root test with structural break and found no hysteresis in Europe on monthly data from 2000 to 2013. Lee et al (2010) focused on the annual unemployment rate from 1976 to 2004 for nine Asian countries, where he found evidence for hysteresis with structural break unit root tests.…”

Section: Literature Reviewmentioning

confidence: 99%

Unemployment Hysteresis in Middle-Income Countries

Boukraine

2021

JDE

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Business cycles pave the way for asymmetry in the unemployment rate behavior with rapid increases during recessions and slight decreases in expansions. It, in turn, may raise the non-accelerating inflation rate of unemployment and the cost in terms of inflation of any demand stimulus policy. The recent jump in unemployment worldwide due to the COVID-19 pandemic and the government’s stimulus package following it raises questions about the cost of such a decision. We use the smooth transition model (STR) to analyze unemployment dynamics on quarterly data over the last two decades for fifteen middle-income countries. Our results suggest the absence of hysteresis except for Bulgaria, Mexico, and Ukraine. Our policy recommendation for these countries is the necessity of labor market reforms, as hysteresis will considerably reduce any economic stimulus on unemployment.Keywords: Unemployment, hysteresis, STRJEL Classification: C10, J60

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Unemployment hysteresis in the Eurozone area: evidences from nonlinear heterogeneous panel unit root test

Cited by 26 publications

References 27 publications

Hysteresis of unemployment rates in Africa: new findings from Fourier ADF test

Hysteresis of unemployment rates in Africa: new findings from Fourier ADF test

Unemployment and Sectoral Competitiveness in Southern European Union Countries. Facts and Policy Implications

Unemployment Hysteresis in Middle-Income Countries

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