HYSTERESIS IN UNEMPLOYMENT: EVIDENCE FROM 23 OECD COUNTRIES

• Authors: Kanalici Akay Hulya , Mehmet Nargelecekenler , Feridun Yilmaz
• Languages of publication: EN

Abstracts

EN

Unemployment is one of the most important problems that all countries must overcome. As a result, it has become one of the centrally explored issues in macroeconomics, and several theories have been proposed to explain the existence of high unemployment rates. Traditional theories describe movements of unemployment as fluctuations around a natural rate. However, theories that rely on a natural rate of unemployment have been challenged by hysteresis theories. According to hysteresis theories, all shocks have permanent effects on the level of unemployment. This paper tests hysteresis effects in unemployment using panel data for 23 OECD countries covering the period 1963 – 2007. The paper applies both a univariate time series and a panel data unit root test with and without a structural break to test for unemployment hysteresis in OECD countries against the alternative of a natural rate. The results point to the rejection of the hysteresis hypothesis for the OECD and are compatible with structuralise theories as described by the structuralise view.

Keywords

EN

HYSTERESIS; MONETARY POLICY; UNEMPLOYMENT; PANEL UNIT ROOT TEST; OECD

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2011
• Volume: 59
• Issue: 5
• Pages: 488 – 505

Contributors

author

Kanalici Akay Hulya

• Uludag University, Faculty of Economics and Administrative Sciences, Department of Economics, 16059 Gorukle, Bursa, Turkey

author

Mehmet Nargelecekenler

author

Feridun Yilmaz