Nonstationarity and Nonlinearity in the US Unemployment Rate: A Re-examination

Dipak Ghosh and Swarna (Bashu) Dutt

Journal for Economic Educators

Abstract: Conventional econometric tests cannot distinguish nonstationarity from nonlinearity because of the joint modeling of unit roots with threshold effects. Caner–Hansen (CH, 2001) provides a new test which for the first time can simultaneously test for both (without any prior assumption of stationarity). Their threshold unit root tests are more powerful than conventional Augmented Dickey-Fuller tests, especially when the true process is nonlinear. They look at unemployment among adult males, and find contrary to many previous studies, that it is a “stationary nonlinear threshold process”. This paper attempts to re-examine and reconfirm the CH methodology by using unemployment in the civilian labor force. We extend the data up to December 2004, to see if the results hold up to the recent turbulent times, when unemployment changed dramatically from 3.9 % (1999) to 6.2 % (2003). Our results support the premise that US unemployment is a stationary threshold autoregressive process.

Date: 2008-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://frank.mtsu.edu/~jee/fall2008/4-MS608-2ndrevision.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mts:jrnlee:200809

Access Statistics for this article

More articles in Journal for Economic Educators from Middle Tennessee State University, Business and Economic Research Center Contact information at EDIRC.
Bibliographic data for series maintained by Michael Roach ().