Economics at your fingertips  

Unemployment hysteresis and structural change in Europe

Kurmaş Akdoğan

Empirical Economics, 2017, vol. 53, issue 4, No 5, 1415-1440

Abstract: Abstract We examine the unemployment hysteresis hypothesis for 31 European countries, the USA and Japan, using alternative linear and nonlinear unit root tests, taking into account possible structural breaks. Two types of smooth transition models—Exponential Smooth Transition Autoregressive and Asymmetric Exponential Smooth Transition Autoregressive—are employed to account for the nonlinear mean-reverting behaviour in unemployment due to heterogeneity in hiring and firing costs across firms. Four main results emerge: first, the hysteresis hypothesis is rejected for 60 % of the countries in our sample. Second, nonlinear models capture the asymmetries in unemployment dynamics over the business cycle for some countries. Third, many of the series display multiple structural breaks which might point out shifts in mean level of unemployment. Fourth, forecasting powers of our nonlinear models display poor performance against the linear AR specification. The results have policy implications for the debate on the benefits of demand or supply-side policies for tackling the current unemployment problem in Europe.

Keywords: Unemployment hysteresis; Nonlinear adjustment; Structural breaks; Forecasting (search for similar items in EconPapers)
JEL-codes: E24 C22 E27 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Unemployment Hysteresis and Structural Change in Europe (2016) Downloads
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:

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-016-1171-8

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2021-06-13
Handle: RePEc:spr:empeco:v:53:y:2017:i:4:d:10.1007_s00181-016-1171-8