Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209770
Authors: 
Akram, Q. Farooq
Year of Publication: 
2000
Series/Report no.: 
Arbeidsnotat No. 1999/6
Publisher: 
Norges Bank, Oslo
Abstract: 
This paper tests for multiple equilibria in the Norwegian unemployment rate and investigates whether it displays asymmetric response to positive and negative shocks. Linear and nonlinear univariate models are employed to account for the unemployment behaviour over the period 1972-1997. Among these, only a logistic smooth transition autoregressive (LSTAR) model is data consistent. Accordingly, unemployment is a stationary variable that has switched between two stable equilibria during the sample period. It is shown that a large shock, or a sequence of small shocks, can cause a transition from one equilibrium level to another and thereby have a permanent effect on the unemployment rate. Moreover, unemployment recovers faster from a fall, relative to a given equilibrium level, than from a rise.
Subjects: 
NAIRU
STAR model
Markov regime switching model
hysteresis
multiple unemployment equilibria
JEL: 
E24
C22
C5
E52
Persistent Identifier of the first edition: 
ISBN: 
82-7553-144-6
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no
Document Type: 
Working Paper
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