Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/62698
Authors: 
Caporale, Guglielmo Maria
Gil-Alaña, Luis A.
Year of Publication: 
2000
Series/Report no.: 
Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2001,56
Abstract: 
This paper examines the relationship between unemployment, real oil price and real interest rates in Canada. Instead of following the classical approach based on I(0) stationarity or I(1) cointegrating relationships, we use fractional integration/cointegration techniques which allow for the possibility that unemployment is highly persistent. In line with other studies, we find that all three variables are I(1). But we only find cointegration in the presence of autocorrelated disturbances, which means that the relationship between these variables also has a dynamic component. Furthermore, there is evidence of fractional (as opposed to classical cointegration, which implies long memory and slow reversion to equilibrium. This suggests that an equilibrium model with highly persistent shocks might be adequate to account for the observed behaviour of unemployment.
Subjects: 
Unemployment
Input Prices
Long Memory
Fractional Integration
Fractional Cointegration
JEL: 
C22
C32
C52
E24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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