Cyclical Asymmetries in Unemployment Rates: International Evidence |
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Authors: | José Ramón Cancelo |
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Institution: | 1.Facultad de Ciencias Economicas y Empresariales, Dpto. Economia Aplicada II,Universidade da Coru?a,Corunna,Spain |
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Abstract: | This paper investigates to what extent the observed nonlinearities in the unemployment rates of six major developed economies
are the response to cyclical asymmetries. Two classes of models are compared: strict smooth transition autoregressions and
models where the transition variable is GDP growth, which is considered a more direct indicator of the business cycle. The
empirical evidence points out that nonlinearities in unemployment rates are induced by cyclical asymmetries. It is also found
that in most countries the unemployment rate looks stationary and reverts to a long-run equilibrium rate in periods of normal
growth, while in extreme cyclical situations it tends to become nonstationary as if each extreme cyclical episode had its
own path of equilibrium.
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Keywords: | Nonlinearity STAR models Business cycle Unemployment Unit roots |
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