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

Posted: 15 May 2003

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)

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Abstract

This paper assesses empirically two competing unemployment theories. It identifies one structural break in U.K. and German unemployment around 1980 that is more severe in both absolute and relative terms than that for the United States in 1973. This offers support for the structuralist theory. A nonlinear (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 postbreak 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: Asymmetries, structural breaks, hysteresis, threshold autoregression

JEL Classification: C22, J6

Suggested Citation

Fuertes, Ana-Maria and Coakley, Jerry and Zoega, Gylfi, Evaluating the Persistence and Structuralist Theories of Unemployment from a Nonlinear Perspective. Studies in Nonlinear Dynamics & Econometrics, Vol. 5, No. 3, October 2001; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=396560

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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