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Testing the hypotheses of hysteresis and naturel rate of unemployment for youth and female unemployment: evidence from Fourier panel unit root tests for European Union countries

Year 2020, Volume: 11 Issue: Ek, 56 - 73, 31.12.2020

Abstract

Testing the validity of hypotheses of the natural rate of unemployment and hysteresis in unemployment rates is important in determining the employment policies to be applied. Generally, unit root tests are used to determine the existence of these hypotheses. The hysteresis hypothesis is represented by the unit root process. If the unit root is rejected, it is concluded that the unemployment series is stationary and the natural rate of unemployment hypothesis is valid. The aim of this study is to test the validity of the natural rate of unemployment or hysteresis hypotheses in the total unemployment, female unemployment, youth unemployment, and young female unemployment rates in 28 European Union countries. For this reason, Fourier panel KSS unit root tests were applied to the unemployment series of total, young, female, and young female in the period 2003Q2-2019Q1. According to the findings, in with fixed and with trend model, total unemployment rate series in all countries except Hungary and Portugal have mean reverting process. In this case, while the hysteresis hypothesis in total unemployment rate is valid for the two countries mentioned, the natural rate of unemployment hypothesis is valid in other countries. Also, the findings show that the hypothesis of natural rate of unemployment is valid for female unemployment in 22 other countries except the UK, Spain, Hungary, Germany, Slovenia and Portugal. Besides, it shows that the hypothesis of natural rate of unemployment is valid in all countries for youth unemployment and in 27 other countries except England for youth female unemployment.

References

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Genç ve Kadın İşsizliğinde Histeri ve Doğal Oran Hipotezlerinin Test Edilmesi: Avrupa Birliği Ülkeleri İçin Fourier Panel Birim Kök Testlerinden Kanıtlar

Year 2020, Volume: 11 Issue: Ek, 56 - 73, 31.12.2020

Abstract

İşsizlik oranlarında doğal oran veya histeri hipotezlerinin geçerliliğinin test edilmesi uygulanacak istihdam politikalarının belirlenmesi açısından önemlidir. Söz konusu hipotezlerinin varlığının belirlenmesi için genellikle birim kök testleri kullanılmaktadır. Histeri hipotezi birim kök süreci ile temsil edilirken, birim kökün reddedilmesi halinde işsizlik serisinin durağan olduğu ve doğal oran hipotezinin geçerli olduğu sonucuna ulaşılmaktadır. Bu çalışmanın amacı, 28 Avrupa Birliği ülkesinde toplam işsizlik, kadın işsizliği, genç işsizliği, ve genç kadın işsizliği oranlarında doğal oran veya histeri hipotezinin geçerliliğini test etmektir. Bu nedenle, 2003Q2-2019Q1 dönemi toplam, genç, kadın ve genç kadın işsizlik serilerine Fourier panel KSS birim kök testleri uygulanmıştır. Bulgulara göre, sabit ve trende sahip modelde toplam işsizlikte Macaristan ve Portekiz hariç tüm ülkelerde işsizlik serileri ortalamaya dönme eğilimindedir. Bu durumda bahsedilen iki ülke için toplam işsizlikte histeri hipotezi geçerli iken, diğer ülkelerde doğal oran hipotezinin geçerli olduğunu söylemek mümkündür. Kadın, genç ve genç kadın işsizlik serilerine uygulanan panel birim kök testinden elde edilen bulgular, kadın işsizliğinde İngiltere, İspanya, Macaristan, Almanya, Slovenya ve Portekiz hariç diğer 22 ülkede; genç işsizliğinde tüm ülkelerde ve genç kadın işsizliğinde ise İngiltere hariç diğer 27 ülkede serilerin doğal oran hipotezinin geçerli olduğunu göstermektedir.

References

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  • Akdogan, K. (2016). Unemployment hysteresis and structural change in Europe. Central Bank of the Republic of Turkey Working Papers, 16/18, 1-30.
  • Arestis, P. & Mariscal, I. B.-F. (2000). OECD unemployment: Structural breaks and stationarity. Applied Economics, 32(4), 399-403.
  • Bai, J. & Ng, S. (2004). A panic attack on unit roots and cointegration. Econometrica, 72(4), 1127-1177.
  • Bai, J. & Ng, S. (2010). Panel unit root tests with cross-section dependence: A further investigation. Econometric Theory, 26(4), 1088-1114.
  • Bakas, D. & Papapetrou, E. (2014a). Unemployment in Greece: Evidence from Greek regions using panel unit root tests. The Quarterly Review of Economic and Finance, 54(4), 551-562.
  • Bakas, D. & Papapetrou, E. (2014b). Unemployment by gender: Evidence from EU countries. International Advances in Economic Research, Springer; International Atlantic Economic Society, 20(1), 103-111.
  • Ball, L. M. (2009). Hysteresis in unemployment: Old and new evidence. NBER Working Paper,14818, 1-35.
  • Ball, L. M. & Mankiw, N. G. (2002). The NAIRU in theory and practice. Journal of Economic Perspectives, 16(4), 115-136.
  • Becker, R., Enders, W. & Lee, J. (2006). A stationarity test in the presence of an unknown number of smooth breaks. Journal of Time Series Analysis, 27(3), 381-409.
  • Bekmez, S. & Özpolat, A. (2016). Hysteresis effect on unemployment for men and women: A panel unit root test for oecd countries. International Journal of Financial Research, 7(2), 122-133.
  • Blanchard, O. J. & Summers, L. H. (1986). Hysteresis and the European unemployment problem. NBER Working Paper Series, 1950, 1-78.
  • Blanchard, O. J. & Summers, L. H. (1987). Hysteresis in unemployment. European Economic Review, 31(1-2), 288-295.
  • Blanchard, O. J. & Summers, L. H. (1988). Beyond the natural rate hypothesis. The American Economic Review, 78(2), 182-187.
  • Breitung, J. (2000). The local power of some unit root tests for panel data. Nonstationary Panels, Panel Cointegration, and Dynamic Panels (Advances in Econometrics, 15), (Ed. Badi H. Baltagi; Thomas B. Fomby; R. Carter Hill), JAI Press, Amsterdam, 161-177.
  • Breuer, J. B., McNown, R. & Wallace, M. (2002). Series-specific unit root tests with panel data. Oxford Bulletin of Economics and Statistics, 64(5), 527-546.
  • Brunello, G. (1990). Hysteresis and the Japanese unemployment problem: A preliminary investigation. Oxford Economic Papers, 42(3), 483-500.
  • Candelon, B., Dupuy, A. & Gil-Alana, L. (2009). The nature of occupational unemployment rates in the United States: Hysteresis or structural?. Applied Economics, 41(19), 2483–2493.
  • Caporale, G. M. & Gil-Alana, L. (2014). Youth unemployment in Europe: Persistence and macroeconomic determinants. CESifo Working Paper, 4696, 1-19.
  • Carrion-i-Silvestre, J. L., Barrio-Castro, T. & Lopez-Bazo, E. (2005). Breaking the panels: An application to the GDP per capita. The Econometrics Journal, 8(2), 159-175.
  • Chang, C. K. & Chang, T. (2012). Statistical evidence on the mean reversion of real interest rates: SPSM using the panel KSS test with a fourier function. Applied Economics Letters, 19(13), 1299-1304.
  • Chang, T., Lee, K.-C., Nieh, C.-C. & Wei, C.-C. (2005). An empirical note on testing hysteresis in unemployment for ten European countries: Panel SURADF approach, Applied Economics Letters, 12(14), 881-886.
  • Choi, I. (2001). Unit root tests for panel data. Journal of International Money and Finance, 20(2), 249-272.
  • Chortareas, G. & Kapetanios, G. (2009). Getting PPP right: Identifying mean-reverting real exchange rates in panels. Journal of Banking and Finance, 33(2), 390-404.
  • Chou, H. C. & Zhang, Y. C. (2012). Unemployment hysteresis in G20 countries: Evidence from non-linear panel unit-root tests. African Journal of Business Management, 6(49), 11887-11890.
  • Christopoulos, D. K. & Leon-Ledesma, M. (2007). Unemployment hysteresis in EU countries: What do we really know about it?, Journal of Economic Studies, 34(2), 80-89.
  • Cuestas, J. C. & Gil-Alana, L. A. (2011). Unemployment hysteresis, structural changes, non-linearities and fractional integration in European transition economies. Sheffield Economic Research Paper Series, 2011005, 1-35.
  • Dickey, D. A. & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427-431.
  • Dickey, D. A. & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057-1072.
  • Doğan, C. & Erdoğan, S. (2016). An empirical analyses of unemployment hysteresis and natural rate of unemployment approaches for MENA countries. Optimum Ekonomi ve Yönetim Bilimleri Dergisi, 3(2), 41-50.
  • Dritsaki, C. & Dritsaki, M. (2013). "Hysteresis in unemployment: An empirical research for three member states of the European Union." Theoretical and Applied Economics, 20(4), 35-46.
  • Dursun, G., & Yakite, H., (2017). Youth unemployment hysteresis in the CEMAC countries: Evidences from SURADF and panel data analysis with multiple structural breaks under cross-sectional dependence. European Congress on Economic Issues-ECOEI 2017, Kocaeli, Turkey.
  • Elike, U., Anoruo, E. & Nwala, K. (2018). Testing for hysteresis in unemployment for African countries using wavelet unit root tests. Journal of Applied Economics and Business Research, 8(3), 185-197.
  • Feve, P., Henin, P. Y. & Jolivaldt, P. (2003). Testing for hysteresis: unemployment persistence and wage adjustment. Empirical Economics, 28, 535–552.
  • Friedman, M. (1968). The role of monetary policy. American Economic Review, 58(1), 1-17.
  • Furuoka, F. (2014a). Does hysteresis exist in unemployment? New findings from fourteen regions of the Czech Republic. Finance a úvěr-Czech Journal of Economics and Finance, 64(1), 59-78.
  • Furuoka, F. (2014b). Hysteresis in European labour market. MPRA Paper, 60946, 1-14.
  • Garcia-Cintado, A., Romero-Avila, D. & Usabiaga C. (2015). Can the hysteresis hypothesis in Spanish regional unemployment be beaten? New evidence from unit root tests with breaks. Economic Modelling, 47, 244-252.
  • Gil-Alana, L. A., Özdemir, Z. A. & Tansel, A. (2017). Long memory in Turkish unemployment rates. IZA Institute of Labor Economics Discussion Paper Series, 11053, 1-36.
  • Güloğlu, B. ve İspir S. (2011). Doğal işsizlik oranı mı? İşsizlik histerisi mi? Türkiye için sektörel panel birim kök sınaması analizi. Ege Akademik Bakış, 11(2): 205-215.
  • Hadri, K. (2000). Testing for stationarity in heterogeneous panel data. The Econometrics Journal, 3(2), 148-161.
  • Hadri, K. & Kurozumi, E. (2011). A locally optimal test for no unit root in cross-sectionally dependent panel data. Hitotsubashi Journal of Economics, 52(2), 165-184.
  • Hadri, K. & Rao, Y. (2008). Panel stationarity test with structural breaks. Oxford Bulletin of Economics and Statistics, 70(2), 245-269.
  • Hall, R. (1975). The rigidity of wages and the persistence of unemployment. Brookings Papers on Economic Activity, 6(2), 301-350.
  • Im, K. S., Lee, J. & Tieslau, M. (2005). Panel LM unit-root tests with level shifts. Oxford Bulletin of Economics and Statistics, 67(3), 393-419.
  • Im, K. S., Pesaran, M. H. & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53-74.
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There are 91 citations in total.

Details

Primary Language Turkish
Journal Section Articles
Authors

Murat Belke 0000-0002-3299-7162

Publication Date December 31, 2020
Submission Date November 2, 2020
Published in Issue Year 2020 Volume: 11 Issue: Ek

Cite

APA Belke, M. (2020). Genç ve Kadın İşsizliğinde Histeri ve Doğal Oran Hipotezlerinin Test Edilmesi: Avrupa Birliği Ülkeleri İçin Fourier Panel Birim Kök Testlerinden Kanıtlar. Gümüşhane Üniversitesi Sosyal Bilimler Dergisi, 11(Ek), 56-73. https://doi.org/10.36362/gumus.820092