A new test for analysing hysteresis in European unemployment

Document Type

Article

Publication Date

1-1-2017

Abstract

This article proposes a new unit root test to analyse unemployment hysteresis. The test is able to incorporate cross-sectional dependence, unattended nonlinearity and unknown structural breaks in the time-series data. This study used data on unemployment in five European countries. The findings indicated that conventional unit root tests failed to reject the null hypothesis of hysteresis for all countries. However, the newly proposed unit root test was able to reject the null hypothesis for the Spanish unemployment rate.

Keywords

Unemployment hysteresis, Europe, Unit root, Cross-sectional dependence, Fourier function approximation

Publication Title

Applied Economics Letters

Volume

24

Issue

15

Publisher

Taylor & Francis

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