Hysteresis in unemployment: Fact or fiction?

Naveen Srinivasan and Pratik Mitra

Economics Letters, 2012, vol. 115, issue 3, 419-422

Abstract: A stylized fact of European unemployment dynamics is one of extreme persistence and possible unit root behavior. This has led to a major reconsideration of the natural rate paradigm. We apply the Kalman filter to estimate the natural rate of unemployment for Germany and France. When the moving natural rate model is tested against the alternative of a unit root process, the unit root hypothesis is resoundingly rejected.

Keywords: Hysteresis; Natural rate of unemployment; Kalman filter (search for similar items in EconPapers)
JEL-codes: E2 J4 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:115:y:2012:i:3:p:419-422

DOI: 10.1016/j.econlet.2011.12.070

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