Hysteresis and the NAIRU: The Case of Countries in Transition

Gordana Marjanovic, Ljiljana Maksimovic and Nenad Stanisic

Prague Economic Papers, 2015, vol. 2015, issue 5, 503-515

Abstract: The paper examines the hysteresis hypothesis in unemployment in the case of eight selected countries in transition, using the Kalman filter and testing whether the NAIRU time series are stationary. The empirical results show that the hysteresis effect is confirmed for the majority of the countries. Testing the influence of the inflation growth rate on the decline in the NAIRU and vice versa, performed using the panel regression with fixed effect, confirmed that the increase in inflation leads to decline in the NAIRU. The conclusion also suggests the existence of the impact of actual unemployment rate on the NAIRU, which may be affected by the change in aggregate demand.

Keywords: unemployment; NAIRU; Kalman filter; inflation; hysteresis (search for similar items in EconPapers)
JEL-codes: C13 E24 E30 E50 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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DOI: 10.18267/j.pep.526

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