Evaluating the Persistence and Structuralist Theories of Unemployment from a Nonlinear Perspective

Birkbeck College Discussion Paper No. 28/99

Cass Business School Research Paper

39 Pages Posted: 13 Nov 2001

See all articles by Ana-Maria Fuertes

Ana-Maria Fuertes

Cass Business School, City University of London

Jerry Coakley

University of Essex - Essex Business School

Gylfi Zoega

University of Iceland; University of London - Birkbeck College; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2001

Abstract

This paper assesses empirically two competing accounts of high unemployment, the structuralist and persistence theories. It identifies one structural break in UK and German unemployment around 1980 which is more severe in both absolute and relative terms than that for the US in 1973. This offers support for the structuralist theory. A nonlinear, momentum-TAR model is used to capture fast-up, slow-down unemployment dynamics. Impulse response functions suggest that the half-lives of shocks are longer in the post-break subsamples, especially in Europe, which places the persistence theory closer to the mark. We conclude that elements from both theories are needed for an adequate account of unemployment dynamics.

Keywords: Business cycle asymmetries, structural break, hysteresis

JEL Classification: C22, E30, J60

Suggested Citation

Fuertes, Ana-Maria and Coakley, Jerry and Zoega, Gylfi, Evaluating the Persistence and Structuralist Theories of Unemployment from a Nonlinear Perspective (November 2001). Birkbeck College Discussion Paper No. 28/99; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=290406 or http://dx.doi.org/10.2139/ssrn.290406

Ana-Maria Fuertes

Cass Business School, City University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 207 477 0186 (Phone)
+44 207 477 8881 (Fax)

HOME PAGE: http://www.city.ac.uk/people/academics/ana-maria-fuertes

Jerry Coakley (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206 872455 (Phone)
+44 1206 873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/afm/staff/coakley.shtm

Gylfi Zoega

University of Iceland ( email )

IS-101 Reykjavik
Iceland

University of London - Birkbeck College ( email )

Malet Street
London, WC1E 7HX
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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