Detecting unemployment hysteresis: a simultaneous unobserved components model with Markov switching

Sabine Klinger () and Enzo Weber

No 201528, IAB-Discussion Paper from Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]

Abstract: "We construct a new Markov-switching unobserved components framework for the analysis of hysteresis effects. Our model unifies the ingredients of trend-cycle decomposition, identification of spillovers between the components and asymmetry over the business cycle. Employing the model for Germany and the U.S. over 55 years, we find that the decades-long upward trend in German unemployment is fully explained by hysteresis. The Great Recession was well absorbed because both hysteresis effects and structural unemployment were substantially reduced after institutional reforms. In contrast, U.S. unemployment did not evolve according to hysteresis, not even during the Great Recession." (Author's abstract, IAB-Doku) ((en))

Keywords: Bundesrepublik Deutschland; USA; Hysterese; Arbeitslosigkeitsentwicklung; internationaler Vergleich; Konjunkturzyklus; Rezession; strukturelle Arbeitslosigkeit; Arbeitslosigkeit; 1960-2015 (search for similar items in EconPapers)
JEL-codes: C32 E24 E32 J64 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2015
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in/as: Economics Letters, Vol. 144, No. July (2016), S. 115 -118, doi:10.1016/j.econlet.2016.04.027

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Persistent link: https://EconPapers.repec.org/RePEc:iab:iabdpa:201528

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