Testing Hysteresis in Unemployment in G7 Countries Using Quantile Unit Root Test with both Sharp Shifts and Smooth Breaks

Yushi Jiang (), Yifei Cai (), Yi-Ting Peng () and Tsangyao Chang
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Yushi Jiang: Southwest Jiaotong University
Yifei Cai: The University of Western Australia
Yi-Ting Peng: Chaoyang University of Technology

Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 2019, vol. 142, issue 3, No 15, 1229 pages

Abstract: Abstract We apply a Quantile unit root test with both Sharp Shifts and Smooth Breaks to revisit hysteresis in unemployment for G7 countries using data for the period 1980–2017. Results from the conventional unit root tests indicate that hysteresis in unemployment does hold in half of these G7 countries during the period 1980–2017. A quantile Kolmogorov–Smirnov test fails to reject hysteresis in the unemployment hypothesis for our quarterly data but not in monthly data in G7 countries. Empirical results from our proposed quantile unit root test considering both sharp shifts and smooth breaks indicate that hysteresis in unemployment can be rejected over certain quantiles. A quantile Kolmogorov–Smirnov test results demonstrating hysteresis in unemployment does not hold in G7 countries for both monthly and quarterly data. These empirical findings have important policy implications in G7 countries.

Keywords: Quantile unit root test; Hysteresis; Unemployment; Sharp shifts and smooth breaks (search for similar items in EconPapers)
JEL-codes: C12 C22 E24 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11205-018-1948-6

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