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Unit roots and trend breaks in the Greek labor market

Author

Listed:
  • Ioannis A Venetis
  • Paraskevi K Salamaliki
Abstract
Purpose - – The purpose of this paper is to examine the time series behavior of Greek labor market series by providing an empirical perspective on trend breaks and unit roots. Trend breaks represent aggregate behavior responses to “infrequent” changes in economic fundamentals, including changes in fiscal or labor market conditions, as have been perceived in Greece during the last years. Unit roots reveal whether “regular” shocks have significant effects on the level of the series over a specified finite horizon. Design/methodology/approach - – The authors employ recent procedures that deal with the “circular testing problem” between tests on the parameters of the trend function and unit root tests that often arises in empirical applications. These techniques assess trend function stability and are robust regardless of whether the noise component is stationary or having a unit root. Then, conditional on the presence of breaks, the authors test whether the series can be characterized by a stochastic trend. Findings - – The analysis provides evidence of “infrequent” trend breaks that appear to coincide with the recent global economic crisis and the implementation of the counteraction (fiscal) measures to the Greek debt crisis. Allowing for trend breaks does not lead to a rejection of the unit root hypothesis, which might reflect the low flexibility of the country’s labor market operation. Practical implications - – The procedures employed can be viewed as new tools that might help empirical researchers to explore more accurately the characteristics of individual time series and to find reasonable approximations to the true processes of the time series examined. Originality/value - – The paper provides new information on the presence of structural changes in the Greek labor market, and on whether the “aggressive” and “occasional” nature of fiscal measures can be approximated by infrequent changes in the slope of the trend function.

Suggested Citation

  • Ioannis A Venetis & Paraskevi K Salamaliki, 2015. "Unit roots and trend breaks in the Greek labor market," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 42(4), pages 641-658, September.
    • Handle: RePEc:eme:jespps:v:42:y:2015:i:4:p:641-658
    DOI: 10.1108/JES-12-2013-0194
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    Citations

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    Cited by:

    1. Joan Daouli & Michael Demoussis & Nicholas Giannakopoulos & Nikolitsa Lampropoulou, 2015. "The Ins and Outs of Unemployment in the Current Greek Economic Crisis," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 13(2), pages 177-196.
    2. Joan Daouli & Michael Demoussis & Nicholas Giannakopoulos & Ioannis Laliotis, 2017. "The wage curve before and during the Greek economic crisis," Empirical Economics, Springer, vol. 52(1), pages 59-77, February.
    3. Daouli, Joan & Demoussis, Michael & Giannakopoulos, Nicholas & Lambropoulou, Nikolitsa, 2015. "The ins and outs of Greek unemployment in the Great Depression," MPRA Paper 66299, University Library of Munich, Germany.
    4. Marina Faďoš & Mária Bohdalová, 2019. "Unemployment gender inequality: evidence from the 27 European Union countries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(3), pages 349-371, September.

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