EconPapers    
Economics at your fingertips  
 

A Markov-Switching Vector Equilibrium Correction Model of the UK Labour Market

Hans-Martin Krolzig (), Massimiliano Marcellino and Grayham Mizon

No 185, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: There is a wide literature on the dynamic adjustment of employment and its relationship with the business cycle. Our aim is to propose a statistical model that offers a congruent representation of post-war UK labour market. We use a cointegrated vector autoregressive Markov-switching model where some parameters change according to the phase of the business cycle. Output, employment, labour supply and real earnings are found to have a common cyclical component. The long run dynamics are characterized by two cointegrating vectors: trend-adjusted labour productivity and the labour share. Despite there having been many changes affecting this sector of the UK economy, the Markov-switching vector-equilibrium-correction model with three regimes representing recession, growth and high growth provides a good characterization of the sample data over the period 1966(3)-1993(1) In an out-of-sample forecast experiment over the period 1991(2)-1993(1) it beats linear and non-linear model alternatives. The results of an impulse-response analysis highlight the dangers of using VARs when the constancy of the estimated coefficients has not been established.

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)
ftp://ftp.igier.uni-bocconi.it/wp/2001/185.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Failed to connect to FTP server ftp.igier.uni-bocconi.it: No such host is known.

Related works:
Journal Article: A Markov-switching vector equilibrium correction model of the UK labour market (2002) 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: https://EconPapers.repec.org/RePEc:igi:igierp:185

Ordering information: This working paper can be ordered from
http://www.igier.unibocconi.it/en/papers/index.htm

Access Statistics for this paper

More papers in Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University via Rontgen, 1 - 20136 Milano (Italy).
Bibliographic data for series maintained by (). This e-mail address is bad, please contact .

 
Page updated 2019-09-15
Handle: RePEc:igi:igierp:185