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

Olaoluwa Yaya, Ahamuefula Ogbonna and Robert Mudida

Quality & Quantity: International Journal of Methodology, 2019, vol. 53, issue 6, No 6, 2795 pages

Abstract: Abstract We investigate the existence of the unit root hypothesis in the unemployment rates of 42 African countries using the Fourier ADF test. 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 seven countries (Algeria, Botswana, Cabo Verde, Congo DR, Guinea-Bissau, Liberia and Tanzania) out of the 42 African countries. This implies that with the exception of the seven countries mentioned, shocks to unemployment will be transitory and strong policy action will not be required to address unemployment challenges. This suggests that hysteresis effects will be offset overall since these are concentrated in smaller African economies and portends for a faster recovery to shocks in the broader African context. Robustness check proves the superiority of the Fourier unit root tests with structural break over other lower alternatives.

Keywords: Africa; Fourier function; Hysteresis hypothesis; Structural breaks; Natural rate of unemployment; Unemployment rate; Unit root test (search for similar items in EconPapers)
JEL-codes: C22 E24 J64 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://link.springer.com/10.1007/s11135-019-00894-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Hysteresis of Unemployment Rates in Africa: New Findings from Fourier ADF test (2019)
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:spr:qualqt:v:53:y:2019:i:6:d:10.1007_s11135-019-00894-6

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11135

DOI: 10.1007/s11135-019-00894-6

Access Statistics for this article

Quality & Quantity: International Journal of Methodology is currently edited by Vittorio Capecchi

More articles in Quality & Quantity: International Journal of Methodology from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().