Mean reversion in the US unemployment rate - evidence from bootstrapped out-of-sample forecasts

Magnus Gustavsson and Pär Österholm

Applied Economics Letters, 2011, vol. 18, issue 7, 643-646

Abstract: This article investigates whether the US unemployment rate is best described as a unit-root or mean-reverting process. An out-of-sample forecast exercise is conducted in which the performance of an autoregressive (AR) model with an imposed unit root is compared with that of a mean-reverting AR model. A bootstrap distribution for the relative root mean square forecast error is generated and provides strong support for mean reversion in the US unemployment rate.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:18:y:2011:i:7:p:643-646

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DOI: 10.1080/13504851003761855

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