Unemployment, Hysterisis and Transition

Miguel Leon-Ledesma and Peter McAdam ()

No 137, Royal Economic Society Annual Conference 2003 from Royal Economic Society

Abstract: We quantify the degree of persistence in the unemployment rates of transition countries using a variety of methods benchmarked against the EU. In doing so, we will also characterize the dynamic behavior of unemployment in the CEECs during the past decade. In part of the paper, we will work with the concept of linear ÒHysteresisÓ as described by the presence of unit roots in unemployment as in most empirical research on this area. Given that this is potentially a rather narrow definition, we will also take into account the existence of structural breaks and non-linear dynamics in unemployment in order to allow for a richer set of dynamics. Finally, we examine whether CEECsÕ unemployment presents features of multiple equilibria, that is, if it remains locked into a new level whenever a structural change occurs. Our findings show that, in general, we can reject the unit root hypothesis after controlling for structural changes and business cycle effects, but we can observe the presence of a high and low unemployment equilibria. The speed of adjustment is faster for CEECs than the EU, although CEECs tend to move more frequently between equilibria.

Keywords: unemployment; hysterisis; unit root; transition (search for similar items in EconPapers)
JEL-codes: C22 C23 E24 (search for similar items in EconPapers)
Date: 2003-06-04
New Economics Papers: this item is included in nep-lab and nep-tra
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: UNEMPLOYMENT, HYSTERESIS AND TRANSITION (2004)
Working Paper: Unemployment, hysteresis and transition (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ecj:ac2003:137

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