A smooth-transition model of the Australian unemployment rate

Gunnar Bårdsen, Stan Hurn and Zoë McHugh
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Zoë McHugh: School of Economics and Finance, Queensland University of Technology

Working Paper Series from Department of Economics, Norwegian University of Science and Technology

Abstract: Models of the aggregate unemployment rate have traditionally been estimated from structural models of the labour market or in a linear single-equation framework. However, theory as well as evidence suggest that the unemployment rate is asymmetric and should be modelled in a non-linear framework. In this paper the unemployment rate in Australia is modelled as a non-linear function of aggregate demand and real wages. Negative changes in aggregate demand cause the unemployment rate to rise rapidly, while real wage rigidity contributes its to slow adjustment back towards a lower level of unemployment. The model is developed by exploiting recent developments in automated model-selection procedures.

Keywords: unemployment; non-linearity; dynamic modelling; aggregate demand; real wages (search for similar items in EconPapers)
JEL-codes: C12 C52 C87 E24 E32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2002-05-22, Revised 2003-07-01
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:nst:samfok:1002

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