Hysteresis in European labour market

Fumitaka Furuoka

MPRA Paper from University Library of Munich, Germany

Abstract: This paper revisits the hysteresis and unemployment problem in Europe by using new data and some innovative methods. Blanchard and Summers are among first researchers to detect the existence of unemployment hysteresis and to attribute the hysteresis effects to the European unemployment problem (Blanchard and Summers, 1986). Despite numerous empirical inquiries on this topic, researchers have not decided whether the hysteresis would exist in unemployment. Thus, this paper chooses five countries in the region, namely France, Germany, Italy, Spain and United Kingdom, and examines systematically their unemployment behaviours by employing several different econometric tests, such as the SUR-ADF test (Breuer et al., 2002), the Fourier ADF (FADF) test (Enders and Lee, 2012) and the SUR-Fourier ADF (SUR-FADF) test. These four tests produced consistent findings that unemployment rates in these five European countries could be described as the unit root process. In other words, these different unit root tests uniformly detected the existence of hysteresis in these five countries in line with the hysteresis hypothesis.

Keywords: Unemployment hysteresis; Europe; unit root; nonlinear (search for similar items in EconPapers)
JEL-codes: C22 E24 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:60946

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