Asymmetric behavior of unemployment rates: Evidence from the quantile covariate unit root test

Lee, Cheng-Feng; Hu, Te-Chung; Li, Ping-Cheng; Tsong, Ching-Chuan

doi:10.1016/j.japwor.2013.08.002

Cited by 13 publications

(5 citation statements)

References 37 publications

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“…The empirical results of ADF and KPSS test suggest mixed results for the series in levels. These findings are partly consistent to the results of Roed (1996), Chang et al (2007), Lin et al (2008), Gustavsson and Osterholm (2010), Lee et al (2010), Chang and Lee (2011a, b), Chang (2011), Lee et al (2013), andFuruoka (2014), indicating that hysteresis in unemployment holds.…”

Section: Traditional Unit Root Testssupporting

confidence: 90%

Testing Hysteresis in Unemployment in G7 Countries Using Quantile Unit Root Test with both Sharp Shifts and Smooth Breaks

et al. 2018

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We apply a Quantile unit root test with both Sharp Shifts and Smooth Breaks to revisit hysteresis in unemployment for G7 countries using data for the period 1980-2017. Results from the conventional unit root tests indicate that hysteresis in unemployment does hold in half of these G7 countries during the period 1980-2017. A quantile Kolmogorov-Smirnov test fails to reject hysteresis in the unemployment hypothesis for our quarterly data but not in monthly data in G7 countries. Empirical results from our proposed quantile unit root test considering both sharp shifts and smooth breaks indicate that hysteresis in unemployment can be rejected over certain quantiles. A quantile Kolmogorov-Smirnov test results demonstrating hysteresis in unemployment does not hold in G7 countries for both monthly and quarterly data. These empirical findings have important policy implications in G7 countries.

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Section: Traditional Unit Root Testssupporting

confidence: 90%

Testing Hysteresis in Unemployment in G7 Countries Using Quantile Unit Root Test with both Sharp Shifts and Smooth Breaks

et al. 2018

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“…Stationarity or unit root presence in GDP time series is a controversial issue and has long been a puzzle in the literature (see for example Cushman (2016) and references cited therein). Similarly, the existence of unit root in unemployment data is questionable (see (Lee et al, 2013(Lee et al, , 2009 and references cited therein).…”

Section: Testing For Unit Roots and Cointegrationmentioning

confidence: 99%

Okun's law: Copula-based evidence from G7 countries

Benos

Stavrakoudis

2022

The Quarterly Review of Economics and Finance

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In this paper we present evidence on the association between unemployment and output in the G7 economies, which has direct implications for the validity of Okun's Law.Specifically, we investigate dependence and asymmetry between the residuals of the output and unemployment first difference equations using the copula methodology. We find that dependence between GDP and unemployment disturbances is strong only in USA and France followed by Canada, the UK and Germany. There is no dependence in Italy and Japan. This enhances the validity of Okun's Law in the former countries without invalidating it in Italy and Japan, since there is still a negative relationship given by the systematic part of the output-unemployment difference equations estimates. Also, there is asymmetry in the former five countries. Output disturbances are associated with unemployment ones only during recessions, while they are completely disentangled throughout contractions in the US, France, Canada, the UK and Germany. These findings imply that USA and France, and less so Canada, Great Britain and Germany provide the most favorable environment for counter-cyclical economic policies. In these economies, policy makers should react more than output-unemployment dynamic equations dictate in case of output slumps. However, during recoveries in these countries and in Italy as well as Japan during the whole business cycle, authorities ought to base stabilization policies solely on the systematic part of the relation between output and unemployment changes.Our results provide guidance to policy makers in addition to what is suggested by traditional empirical approaches, which focus on the estimation of the deterministic part of the output-unemployment relationship.

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“…In addition to linear linkages, the variables of interest may have nonlinear linkages. This is due to growing empirical evidence that suggests nonlinearities in unemployment rate time series (see, e.g., Rothman 1991Rothman , 1998Skalin and Terasvirta 2002 ;Caporale and Gil-Alanal 2007 ;Cancelo 2007 ;Lee et al 2013 ). These nonlinearities are normally attributed to asymmetries in adjustment costs ( Bentolilla and Bertola 1990 ), job destruction ( Caballero and Hammour 1994 ), and to capital destruction ( Bean 1989 ).…”

Section: Causality Approachmentioning

confidence: 99%

Testing the relationships between shadow economy and unemployment: empirical evidence from linear and nonlinear tests

Saafi

Farhat

Mohamed

2015

Studies in Nonlinear Dynamics &Amp; Econometrics

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The aim of this paper is to empirically investigate the dynamic linkages between unemployment and shadow economy for 32 developing and developed countries for the period 1980 -2009 using parametric and non-parametric techniques. To this end, the Hansen and Seo (2002) threshold cointegration approach and the nonlinear causality test of Kyrtsou and Labys (2006) are applied to assess these relationships. Results obtained clearly do not support the view that unemployment and shadow economy are neutral with respect to each other, except in the case of Bolivia, China, Colombia, Pakistan, Philippines and Portugal, where a neutral relationship is found. We find, however, considerable evidence of bi-directionality in Finland and Sweden. This indicates that high levels of unemployment lead to high levels of shadow economy and vice versa. We also find clear evidence of unidirectional causality running from unemployment to shadow economy in the US, Jamaica and Venezuela which implies that, in these three countries, a faster rate of unemployment promotes a higher share of the underground economy in total GDP. Further, the causality relationship appears to be uni-directional but reversed for Chile. Overall, our findings suggest that policy implications of the unemployment-shadow economy relationships should be interpreted with caution, taking into account the test-dependent and country-specific results.

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Asymmetric behavior of unemployment rates: Evidence from the quantile covariate unit root test

Cited by 13 publications

References 37 publications

Testing Hysteresis in Unemployment in G7 Countries Using Quantile Unit Root Test with both Sharp Shifts and Smooth Breaks

Testing Hysteresis in Unemployment in G7 Countries Using Quantile Unit Root Test with both Sharp Shifts and Smooth Breaks

Okun's law: Copula-based evidence from G7 countries

Testing the relationships between shadow economy and unemployment: empirical evidence from linear and nonlinear tests

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