Testing Unemployment Theories: A Multivariate Long Memory Approach

21 Pages Posted: 30 Jan 2014

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Luis A. Gil-Alana

University of Navarra - Department of Economics

Yuliya Lovcha

University of Navarra - Pamplona Campus

Multiple version iconThere are 2 versions of this paper

Date Written: December 2013

Abstract

This paper investigates the empirical relevance of different unemployment theories in three major economies, namely the UK, the US and Japan, by estimating the degree of dependence in the unemployment series. Both univariate and multivariate long memory methods are used. The results vary depending on whether the former or the latter approach is followed. Specifically, when taking a univariate approach, the unit root null cannot be rejected in case of the UK and Japanese unemployment series, and some degree of mean reversion (d < 1) is found in the case of the US unemployment rate. When applying multivariate methods instead, higher orders of integration are still found for the UK and Japanese series, but the NAIRU hypothesis cannot be rejected in the case of the US.

Keywords: Unemployment rate, Multivariate long memory, Fractional integration

JEL Classification: C22, C32, E24

Suggested Citation

Caporale, Guglielmo Maria and Gil-Alana, Luis A. and Lovcha, Yuliya, Testing Unemployment Theories: A Multivariate Long Memory Approach (December 2013). DIW Berlin Discussion Paper No. 1345, Available at SSRN: https://ssrn.com/abstract=2387561 or http://dx.doi.org/10.2139/ssrn.2387561

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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London South Bank University ( email )

Centre for Monetary and Financial Economics
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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

German Institute for Economic Research (DIW Berlin) ( email )

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Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

Yuliya Lovcha

University of Navarra - Pamplona Campus ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

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