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Is it the natural rate or hysteresis hypothesis for unemployment in Newly Industrialized Economies?

Dieu Nsenga (), Mirada Nach (), Hlalefang Khobai, Clement Moyo () and Andrew Phiri ()
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Dieu Nsenga: Department of Economics, Nelson Mandela University
Mirada Nach: Department of Economics, Nelson Mandela University

No 1817, Working Papers from Department of Economics, Nelson Mandela University

Abstract: The focus of our study is on determining whether unemployment rates in 8 New Industrialized Economies conform to the natural rate hypothesis or the hysteresis hypothesis. To this end, we employ a variety of unit of unit root testing procedures to quarterly data collected between 2002:q1 and 2017:q1. In summary of our findings, conventional unit root tests which neither account for asymmetries or structural breaks produce the most inconclusive results. On the other hand, tests which incorporate structural breaks whilst ignoring asymmetries tends to favour the natural rate hypothesis for our panel of countries. However, simultaneously accounting for asymmetries and unobserved structural breaks seemingly produces the most robust findings and confirms hysteresis in all unemployment rates except for the Asian economies/countries of Thailand and the Philippines.

Keywords: Natural rate hypothesis; hysteresis hypothesis; Unemployment; unit root tests; Fourier function approximation; Newly Industrialized Economies. (search for similar items in EconPapers)
JEL-codes: C22 C51 E24 J60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab, nep-mac and nep-sea
Date: 2018-04, Revised 2018-04
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http://repec.mandela.ac.za/RePEc/mnd/wpaper/paper.1817.pdf First version, 2018 (application/pdf)

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