NON-LINEARITIES AND HYSTERESIS IN OECD UNEMPLOYMENT
Abstract
In this paper we test for the presence of unit roots in OECD unemployment controlling for the possibility that the unemployment rate shows a non linear behaviour. In order to do so, we make use of recently developed M-TAR tests for unit roots. Our results show that controlling for non linearities we can reject the null of strong hysteresis for Australia, Denmark, Portugal and the US. Overall, we find a higher degree of persistence after positive shocks hit the economy (i.e. shocks that reduce the unemployment rate). This is not consistent with matching theories of persistence.Downloads
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