A Cross-Country Analysis of Unemployment and Bonds with Long-Memory Relations

Thomas Dimpfl and Tobias Langen

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We analyze the relationship between unemployment rate changes and government bond yields during and after the most recent financial crisis across nine industrialized countries. The study is conducted on a weekly basis and we therefore nowcast unemployment data, which are only available once a month, on a weekly frequency using Google search query data. In order to account for the time series' long-memory components during the first-stage nowcasting and the second-stage modeling, we draw on Corsi's (2009, JEF) heterogeneous autoregressive time series model. In particular, we adapt this idea to a setting of mixed-frequency nowcasting. Our results indicate that Google searches greatly increase the nowcasting accuracy of unemployment rate changes. The impact of an idiosyncratic rise in unemployment on bond yields turns out to be positive for European countries while it is negative for the United States and Australia. The speed of the response also varies. Not unexpectedly, bond yields do not have an impact on unemployment. Our findings have interesting implications for the way shocks are absorbed in economic systems that differ, in particular, with respect to the central bank's core tasks.

JEL-codes: C53 D53 G12 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/112921/1/VfS_2015_pid_33.pdf (application/pdf)

Related works:
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:zbw:vfsc15:112921

Access Statistics for this paper

More papers in VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().