The non-linear dynamics of output and unemployment in the U.S

Filippo Altissimo and Giovanni Luca Violante ()
Additional contact information
Filippo Altissimo: Research Department, Bank of Italy, and CEPR, Postal: Research Department, Bank of Italy, and CEPR

Journal of Applied Econometrics, 2001, vol. 16, issue 4, pages 461-486

Abstract: This paper studies the joint dynamics of U.S. output and unemployment rate in a non-linear VAR model. The non-linearity is introduced through a feedback variable that endogenously augments the output lags of the VAR in recessionary phases. Sufficient conditions for the ergodicity of the model, potentially applying to a larger class of threshold models, are provided. The linear specification is rejected in favour of our threshold VAR. However, in the estimation the feedback is found to be statistically significant only on unemployment, while it transmits to output through its cross-correlation. This feedback effect from recessions generates important asymmetries in the propagation of shocks, a possible key to interpret the divergence in the measures of persistence in the literature. The regime-dependent persistence also explains the finding that the feedback from recession exerts a positive effect on the long-run growth rate of the economy, an empirical validation of the Schumpeterian macroeconomic theories. Copyright © 2001 John Wiley & Sons, Ltd.

Date: 2001
View list of references View citations in EconPapers

Downloads: (external link)
http://qed.econ.queensu.ca:80/jae/2001-v16.4/ Supporting data files and programs (text/html)

Related works:
Working Paper: The Nonlinear Dynamics of Output and Unemployment in the US (2000)
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: http://EconPapers.repec.org/RePEc:jae:japmet:v:16:y:2001:i:4:p:461-486

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

Access Statistics for this article

Journal of Applied Econometrics is edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Series data maintained by Christopher F. Baum ().