Modelling the US, UK and Japanese unemployment rates: Fractional integration and structural breaks

Guglielmo Maria Caporale and Luis Gil-Alana

Computational Statistics & Data Analysis, 2008, vol. 52, issue 11, 4998-5013

Abstract: A general procedure for fractional integration and structural breaks at unknown points in time is used, which allows for different orders of integration and deterministic components in each subsample. First, the procedure is extended to the non-linear case, and it is shown by means of Monte Carlo experiments to perform well in a non-linear environment. Second, it is applied to test for a single break in the unemployment rate in the US, the UK and Japan. The results shed some light on the empirical relevance of alternative unemployment theories for these countries. Specifically, a structuralist interpretation appears more appropriate for the US and Japan, whilst a hysteresis model accounts better for the UK experience (and also for the Japanese one in the second subsample). These findings are interpreted in terms of structural instability in labour markets with different features.

Date: 2008
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Citations: View citations in EconPapers (35)

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Working Paper: Modelling the US, the UK and Japanese unemployment rates. Fractional integrationand structural breaks (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:csdana:v:52:y:2008:i:11:p:4998-5013

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