Unemployment and input prices: A fractional cointegration approach

Arbeitspapier

This paper examines the relationship between unemployment, real oil price and real interest rates in Canada. Instead of following the classical approach based on I(0) stationarity or I(1) cointegrating relationships, we use fractional integration/cointegration techniques which allow for the possibility that unemployment is highly persistent. In line with other studies, we find that all three variables are I(1). But we only find cointegration in the presence of autocorrelated disturbances, which means that the relationship between these variables also has a dynamic component. Furthermore, there is evidence of fractional (as opposed to classical cointegration, which implies long memory and slow reversion to equilibrium. This suggests that an equilibrium model with highly persistent shocks might be adequate to account for the observed behaviour of unemployment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 373 Discussion Paper ; No. 2001,56

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Evaluation, Validation, and Selection ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: Unemployment ; Input Prices ; Long Memory ; Fractional Integration ; Fractional Cointegration

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Caporale, Guglielmo Maria ; Gil-Alaña, Luis A.
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
• (where): Berlin
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/62698
• URN: urn:nbn:de:kobv:11-10050122
• Last update: 10.03.2025, 11:41 AM CET