Arbeitspapier

Non-linearities and fractional integration in the US unemployment rate

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This paper proposes a model of the US unemployment rate which accounts for both its asymmetry and its long memory. Our approach, based on the tests of Robinson (1994), introduces fractional integration and nonlinearities simultaneously into the same framework (unlike earlier studies employing a sequential procedure), using a Lagrange Multiplier procedure with a standard limit distribution. The empirical results suggest that the US unemployment rate can be specified in terms of a fractionally integrated process, which interacts with some non-linear functions of the labour demand variables (real oil prices and real interest rates). We also find evidence of a long-memory component. Our results are consistent with a hysteresis model with path dependency rather than a NAIRU model with an underlying unemployment equilibrium rate, hence giving support to more activist stabilisation policies. However, any suitable model should also include business cycle asymmetries, with implications for both forecasting and policymaking.

Language: Englisch

Bibliographic citation: Series: HWWA Discussion Paper ; No. 259

Classification: Wirtschaft
Business Fluctuations; Cycles
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

Subject: Unemployment
Asymmetries
Nonlinearities
Fractional Integration
Persistence
Long Memory
Arbeitslosigkeit
Zeitreihenanalyse
Hysteresis
Schätzung
Theorie
Vereinigte Staaten

Event: Geistige Schöpfung

(who): Caporale, Guglielmo Maria
Gil-Alana, Luis A.

Event: Veröffentlichung

(who): Hamburg Institute of International Economics (HWWA)

(where): Hamburg

(when): 2004

Handle: http://hdl.handle.net/10419/19231

Last update: 10.03.2025, 11:44 AM CET

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Object type

Arbeitspapier

Associated

Caporale, Guglielmo Maria
Gil-Alana, Luis A.
Hamburg Institute of International Economics (HWWA)

Time of origin

2004

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