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Hysteresis versus NAIRU and convergence versus divergence: The behavior of regional unemployment rates in Brazil

Fábio Gomes and Cleomar Gomes da Silva

The Quarterly Review of Economics and Finance, 2009, vol. 49, issue 2, 308-322

Abstract: The aim of this work is to analyze the regional unemployment rate behavior in Brazil. Firstly, unit root tests with structural breaks were used to determine which theoretical framework - hysteresis or NAIRU - is more appropriate to explain the unemployment dynamics not only in six Brazilian metropolitan areas - São Paulo, Rio de Janeiro, Belo Horizonte, Porto Alegre, Salvador and Recife - but also at national level. Hysteresis is found to be the best choice in five, but Rio de Janeiro. This indicates a high persistence in the Brazilian regional unemployment rate. Secondly, we investigated whether these five metropolitan regions, characterized by the hysteresis effect, show a stochastic convergence. The latter was found in every case, but Porto Alegre.

Keywords: Unemployment; Unit; root; NAIRU; Hysteresis; Convergence (search for similar items in EconPapers)
Date: 2009
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