Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152668
Authors: 
McAdam, Peter
León-Ledesma, Miguel A.
Year of Publication: 
2003
Series/Report no.: 
ECB Working Paper 234
Abstract: 
We quantify the degree of persistence in unemployment rates of transition countries using a variety of methods benchmarked against the EU. In part of the paper, we work with the concept of linear "Hysteresis" as described by the presence of unit roots in unemployment. Since this is potentially a narrow definition, we also take into account the existence of structural breaks and non-linear dynamics in unemployment. Finally, we examine whether CEECs' unemployment presents features of multiple equilibria: if it remains locked into a new level whenever a structural change occurs. Our findings show that, in general, we can reject the unit root hypothesis after controlling for structural changes and business cycle effects, but we can observe the presence of a high and low unemployment equilibria. The speed of adjustment is faster for CEECs than the EU, although CEECs tend to move more frequently between equilibria.
Subjects: 
Hysteresis
Markov switching
Transition
Unemployment
Unit Root
JEL: 
E24
C22
C23
Document Type: 
Working Paper

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