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An Investigation of the Hysteresis in Unemployment in EU Countries and Turkey with Fourier-KPSS Unit Root Test

Year 2019, Volume: 34 Issue: 1, 15 - 24, 29.03.2019

Çiler Sigeze Nuran Coşkun Esra Ballı

https://doi.org/10.24988/ije.2019341761
Cited By: 6

Abstract

The changes in the unemployment rate and its
hysteria in some EU countries impose significant challenges to  policy makers. To implement appropriate policies,
it is important to examine whether the movement of the unemployment rates in
the country is better corresponded by the unemployment hysteresis or by the
natural rate hypothesis of unemployment. Therefore, this study examines the
hysteresis effects in unemployment using panel data for European Union countries
and Turkey for the period of 1991–2016. For the test we utilize Fourier- KPSS panel
stationarity test which takes into account structural shifts and cross-section
dependency proposed by Nazlioglu and Karul (2017). The results reveal that
unemployment hysteresis hypothesis cannot be rejected for the EU countries and
Turkey except for Latvia, Belgium, Cyprus and Sweden.

Keywords

Fourier-KPSS unemployment hysteresis hypothesis European Union Turkey

References

  • Bakas, D., Papapetrou, E. (2014). Unemployment in Greece: Evidence from Greek Regions Using Panel Unit Root Tests. The Quarterly Review of Economics and Finance, 54, 551-562.
  • 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.
  • Blanchard, O. J., Summers, L. H. (1986). Hysteresis and the European Unemployment Problem. NBER Working Paper Series, No.1950.
  • Bolat, S., Tiwari, A. K., Erdayi, A. U. (2014). Unemployment Hysteresis in the Eurozone Area: Evidences from Nonlinear Heterogeneous Panel Unit Root Test. Applied Economics Letters, 21(8), 536-540.
  • Breusch, T. S., Pagan, A. R. (1980). The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics. The Review of Economic Studies, 47(1), 239-253.
  • Brunello, G. (1990). Hysteresis and the Japanese Unemployment Problem: A Preliminary Investigation. Oxford Economic Papers, 42, 483-500.
  • Camarero, M., Tamarit, C. (2004). Hysteresis vs. Natural Rate of Unemployment: New Evidence For OECD Countries. Economics Letters, 84(3), 413-417.
  • Camarero, M., Carrion-I-Silvestre, J. L., Tamarıt, C. (2006). Testing for Hysteresis in Unemployment in OECD Countries: New Evidence using Stationarity Panel Tests with Breaks. Oxford Bulletin of Economics and Statistics, 68(2), 167-182.
  • Camarero, M., Ordóñez, J. (2006). Is There a Nonlinear Co-Movement in the EU Countries' Unemployment? Economics Letters, 93(2), 157-162.
  • Caner, M., Hansen, B.E. (2001). Threshold Autoregression with a Unit Root. Econometrica, 69(6):1555-1596.
  • Chang, T., Nieh, K.C.,Wei, C.C. (2005). An Empirical Note on Testing Hysteresis in Unemployment for Ten European Countries: Panel SURADF Approach. Applied Economics Letters, 12, 881-886.
  • Chang, M. J., Su, C. Y. (2014). Hysteresis Versus Natural Rate in Taiwan's Unemployment: Evidence from The Educational Attainment Categories. Economic Modelling, 43, 293-304.
  • 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.
  • Christopoulas, D. K., Leon-Ledesma, M. A. (2007). Unemployment Hysteresis in EU Countries: What Do We Really Know About It? Journal of Economic Studies, 34(2), 80-89.
  • Ener, M., Arica, F. (2011). Is There Hysteresis in Unemployment in OECD Countries? Evidence from Panel Unit Root Test with Structural Breaks. Chinese Business Review, 10(4), 294-304.
  • Everaert, G. (2001). Infrequent Large Shocks to Unemployment: New Evidence on Alternative Persistence Perspectives, Labour, 15(4), 555-577.
  • Feve, P., Henin, P.Y., Jolivaldt, P. (2003). Testing for Hysteresis: Unemployment Persistence and Wage Adjustment. Empirical Economics, 28(3), 535–552.
  • Furuoka, F. (2012). Unemployment Hysteresis in the East Asia‐Pacific Region: New Evidence from MADF and SURADF Tests. Asian‐Pacific Economic Literature, 26(2), 133-143.
  • Friedman, M, (1968). The Role of Monetary Policy. American Economic Review, 58, 1–17
  • García-Cintado, A., Romero-Ávila, 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.
  • Ghosh, D., Dutt, S. (2008). Nonstationarity and Nonlinearity In The US Unemployment Rate: A Re-Examination. Journal for Economic and Educators, 8, 43–53.
  • Gray, D. (2004). Persistent Regional Unemployment Differentials Revisited. Regional Studies, 38(2), 167-176.
  • Gustavsson, M., Österholm, P. (2006). The Informational Value of Unemployment Statistics: A Note on the Time Series Properties of Participation Rates. Economics Letters, 92, 428-433.
  • Güloğlu, B., İspir, M.S. (2011). Doğal İşsizlik Oranı Mı? İşsizlik Histerisi Mi? Türkiye için Sektörel Panel Birim Kök Sınaması Analizi. Ege Akademik Bakış, 11(2), 205-215.
  • Jaeger, A., Parkinson, M, (1994). Some Evidence on Hysteresis in Unemployment Rates. European Economic Review, 38(2), 329– 342.
  • Jones, P. M., Enders, W. (2014). On The Use of the Flexible Fourier Form in Unit Root Tests, Endogenous Breaks, and Parameter Instability. Recent Advances in Estimating Nonlinear Models, Springer, 59-83.
  • Karul, Ç. (2016). Esnek Fourier Fonksiyonlu Yeni Bir Panel Birim Kök Testi Önerisi ve OECD Örneği, Yayınlanmamış Yüksek Lisans Tezi. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü, Denizli.
  • Klinger, S., Weber, E. (2016). Detecting Unemployment Hysteresis: A Simultaneous Unobserved Components Model with Markov Switching. Economics Letters, 144, 115-118.
  • Lee, J-D., Lee, C. C., Chang, C. P. (2009). Hysteresis in Unemployment Revisited: Evidence from Panel LM Unit Root Test with Heterogeneous Structural Breaks. Bulletin of Economic Research, 61(4), 325-334.
  • Lee, C.F. (2010). Testing for Unemployment Hysteresis in Nonlinear Heterogeneous Panels: International Evidence. Economic Modelling, 27, 1097-1102.
  • Lee, C., Wu, J. L., Yang, L. (2016). A Simple Panel Unit‐Root Test with Smooth Breaks in the Presence of a Multifactor Error Structure. Oxford Bulletin of Economics and Statistics, 78(3), 365-393.
  • León-Ledesma, M. A., Mcadam, P. (2004). Unemployment, Hysteresis and Transition. Scott J Political Econ, 51, 377–401.
  • Liew, V. K. S., Chai, R. C. J., Puah, C. H. (2012). Does Hysteresis in Unemployment Occur in OECD Countries? Evidence from Parametric and Non-Parametric Panel Unit Roots Tests. International Journal of Economics and Management, 6(2), 446-458.
  • Lin, C. H., Kuo, N. F., Yuan, C. D. (2008). Nonlinear Vs. Nonstationary of Hysteresis in Unemployment: Evidence from OECD Economies. Applied Economics Letters, 15, 483–7.
  • Nazlioglu, S., Karul, C. (2017). A Panel Stationarity Test with Gradual Structural Shifts: Re-Investigate the International Commodity Price Shocks. Economic Modelling, 61, 181-192.
  • Pesaran, M. H. (2006). Estimation and Inference in Large Heterogeneous Panels with A Multifactor Error Structure. Econometrica, 74(4), 967-1012.
  • Pesaran, M. H., Ullah, A., Yamagata, T. (2008). A Bias‐Adjusted LM Test of Error Cross‐Section Independence. The Econometrics Journal, 11(1), 105-127.
  • Phelps, E. S. (1968). Money-Wage Dynamics and Labor-Market Equilibrium. Journal of Political Economy, 76(4), 678-711.
  • Phelps, E. S. (1994). Low-Wage Employment Subsidies Versus the Welfare State. The American Economic Review, 84(2), 54-58.
  • Pissarides, C. A. (1992). Loss of Skill During Unemployment And The Persistence Of Employment Shocks. The Quarterly Journal of Economics, 107(4), 1371-1391.
  • Roed, K. (1996). Unemployment Hysteresis-Macro Evidence from 16 OECD Countries. Empirical Economics, 21(4), 589-600.
  • Smyth, R. (2003). Unemployment Hysteresis in Australian States and Territories: Evidence from Panel Data Unit Root Tests. The Australian Economic Review, 36, 181-192.
  • Song, F. M., Wu, Y. (1998). Hysteresis Unemployment: Evidence from OECD Countries. The Quarterly Review of Economics and Finance, 38, 181-192.

AB Ülkelerinde ve Türkiye'de İşsizlik Histerisinin Fourier-KPSS Birim Kök Testi ile İncelenmesi

Year 2019, Volume: 34 Issue: 1, 15 - 24, 29.03.2019

Çiler Sigeze Nuran Coşkun Esra Ballı

https://doi.org/10.24988/ije.2019341761
Cited By: 6

Abstract

İşsizlik oranındaki değişiklikler ve
bazı AB ülkelerinde işsizlik histerisi politika yapıcılar için önemli zorluklar
doğurmaktadır. Ülkedeki işsizlik oranlarının yapısının işsizlik histerisi veya
doğal oran hipotezi ile daha iyi açıklandığını belirlemek, politika
yapıcılarının uygun politikaları oluşturabilmeleri açısından önem
kazanmaktadır. Bu nedenle, bu çalışmada işsizlik histerisi hipotezi Avrupa
Birliği ülkeleri ve Türkiye için 1991-2016 yıllarını esas alarak Nazlıoğlu ve
Karul (2017) tarafından önerilen yapısal kaymaları ve yatay kesit bağımlılığı
dikkate alan Fourier- KPSS panel durağanlık testi kullanılarak incelenmiştir.
Sonuçlar, işsizlik histerisi hipotezinin Letonya, Belçika, Kıbrıs ve İsveç
haricindeki diğer AB ülkeleri ve Türkiye için geçerli olduğunu göstermektedir.

Keywords

Fourier-KPSS işsizlik histerisi hipotezi Avrupa Birliği Türkiye

References

  • Bakas, D., Papapetrou, E. (2014). Unemployment in Greece: Evidence from Greek Regions Using Panel Unit Root Tests. The Quarterly Review of Economics and Finance, 54, 551-562.
  • 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.
  • Blanchard, O. J., Summers, L. H. (1986). Hysteresis and the European Unemployment Problem. NBER Working Paper Series, No.1950.
  • Bolat, S., Tiwari, A. K., Erdayi, A. U. (2014). Unemployment Hysteresis in the Eurozone Area: Evidences from Nonlinear Heterogeneous Panel Unit Root Test. Applied Economics Letters, 21(8), 536-540.
  • Breusch, T. S., Pagan, A. R. (1980). The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics. The Review of Economic Studies, 47(1), 239-253.
  • Brunello, G. (1990). Hysteresis and the Japanese Unemployment Problem: A Preliminary Investigation. Oxford Economic Papers, 42, 483-500.
  • Camarero, M., Tamarit, C. (2004). Hysteresis vs. Natural Rate of Unemployment: New Evidence For OECD Countries. Economics Letters, 84(3), 413-417.
  • Camarero, M., Carrion-I-Silvestre, J. L., Tamarıt, C. (2006). Testing for Hysteresis in Unemployment in OECD Countries: New Evidence using Stationarity Panel Tests with Breaks. Oxford Bulletin of Economics and Statistics, 68(2), 167-182.
  • Camarero, M., Ordóñez, J. (2006). Is There a Nonlinear Co-Movement in the EU Countries' Unemployment? Economics Letters, 93(2), 157-162.
  • Caner, M., Hansen, B.E. (2001). Threshold Autoregression with a Unit Root. Econometrica, 69(6):1555-1596.
  • Chang, T., Nieh, K.C.,Wei, C.C. (2005). An Empirical Note on Testing Hysteresis in Unemployment for Ten European Countries: Panel SURADF Approach. Applied Economics Letters, 12, 881-886.
  • Chang, M. J., Su, C. Y. (2014). Hysteresis Versus Natural Rate in Taiwan's Unemployment: Evidence from The Educational Attainment Categories. Economic Modelling, 43, 293-304.
  • 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.
  • Christopoulas, D. K., Leon-Ledesma, M. A. (2007). Unemployment Hysteresis in EU Countries: What Do We Really Know About It? Journal of Economic Studies, 34(2), 80-89.
  • Ener, M., Arica, F. (2011). Is There Hysteresis in Unemployment in OECD Countries? Evidence from Panel Unit Root Test with Structural Breaks. Chinese Business Review, 10(4), 294-304.
  • Everaert, G. (2001). Infrequent Large Shocks to Unemployment: New Evidence on Alternative Persistence Perspectives, Labour, 15(4), 555-577.
  • Feve, P., Henin, P.Y., Jolivaldt, P. (2003). Testing for Hysteresis: Unemployment Persistence and Wage Adjustment. Empirical Economics, 28(3), 535–552.
  • Furuoka, F. (2012). Unemployment Hysteresis in the East Asia‐Pacific Region: New Evidence from MADF and SURADF Tests. Asian‐Pacific Economic Literature, 26(2), 133-143.
  • Friedman, M, (1968). The Role of Monetary Policy. American Economic Review, 58, 1–17
  • García-Cintado, A., Romero-Ávila, 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.
  • Ghosh, D., Dutt, S. (2008). Nonstationarity and Nonlinearity In The US Unemployment Rate: A Re-Examination. Journal for Economic and Educators, 8, 43–53.
  • Gray, D. (2004). Persistent Regional Unemployment Differentials Revisited. Regional Studies, 38(2), 167-176.
  • Gustavsson, M., Österholm, P. (2006). The Informational Value of Unemployment Statistics: A Note on the Time Series Properties of Participation Rates. Economics Letters, 92, 428-433.
  • Güloğlu, B., İspir, M.S. (2011). Doğal İşsizlik Oranı Mı? İşsizlik Histerisi Mi? Türkiye için Sektörel Panel Birim Kök Sınaması Analizi. Ege Akademik Bakış, 11(2), 205-215.
  • Jaeger, A., Parkinson, M, (1994). Some Evidence on Hysteresis in Unemployment Rates. European Economic Review, 38(2), 329– 342.
  • Jones, P. M., Enders, W. (2014). On The Use of the Flexible Fourier Form in Unit Root Tests, Endogenous Breaks, and Parameter Instability. Recent Advances in Estimating Nonlinear Models, Springer, 59-83.
  • Karul, Ç. (2016). Esnek Fourier Fonksiyonlu Yeni Bir Panel Birim Kök Testi Önerisi ve OECD Örneği, Yayınlanmamış Yüksek Lisans Tezi. Pamukkale Üniversitesi Sosyal Bilimler Enstitüsü, Denizli.
  • Klinger, S., Weber, E. (2016). Detecting Unemployment Hysteresis: A Simultaneous Unobserved Components Model with Markov Switching. Economics Letters, 144, 115-118.
  • Lee, J-D., Lee, C. C., Chang, C. P. (2009). Hysteresis in Unemployment Revisited: Evidence from Panel LM Unit Root Test with Heterogeneous Structural Breaks. Bulletin of Economic Research, 61(4), 325-334.
  • Lee, C.F. (2010). Testing for Unemployment Hysteresis in Nonlinear Heterogeneous Panels: International Evidence. Economic Modelling, 27, 1097-1102.
  • Lee, C., Wu, J. L., Yang, L. (2016). A Simple Panel Unit‐Root Test with Smooth Breaks in the Presence of a Multifactor Error Structure. Oxford Bulletin of Economics and Statistics, 78(3), 365-393.
  • León-Ledesma, M. A., Mcadam, P. (2004). Unemployment, Hysteresis and Transition. Scott J Political Econ, 51, 377–401.
  • Liew, V. K. S., Chai, R. C. J., Puah, C. H. (2012). Does Hysteresis in Unemployment Occur in OECD Countries? Evidence from Parametric and Non-Parametric Panel Unit Roots Tests. International Journal of Economics and Management, 6(2), 446-458.
  • Lin, C. H., Kuo, N. F., Yuan, C. D. (2008). Nonlinear Vs. Nonstationary of Hysteresis in Unemployment: Evidence from OECD Economies. Applied Economics Letters, 15, 483–7.
  • Nazlioglu, S., Karul, C. (2017). A Panel Stationarity Test with Gradual Structural Shifts: Re-Investigate the International Commodity Price Shocks. Economic Modelling, 61, 181-192.
  • Pesaran, M. H. (2006). Estimation and Inference in Large Heterogeneous Panels with A Multifactor Error Structure. Econometrica, 74(4), 967-1012.
  • Pesaran, M. H., Ullah, A., Yamagata, T. (2008). A Bias‐Adjusted LM Test of Error Cross‐Section Independence. The Econometrics Journal, 11(1), 105-127.
  • Phelps, E. S. (1968). Money-Wage Dynamics and Labor-Market Equilibrium. Journal of Political Economy, 76(4), 678-711.
  • Phelps, E. S. (1994). Low-Wage Employment Subsidies Versus the Welfare State. The American Economic Review, 84(2), 54-58.
  • Pissarides, C. A. (1992). Loss of Skill During Unemployment And The Persistence Of Employment Shocks. The Quarterly Journal of Economics, 107(4), 1371-1391.
  • Roed, K. (1996). Unemployment Hysteresis-Macro Evidence from 16 OECD Countries. Empirical Economics, 21(4), 589-600.
  • Smyth, R. (2003). Unemployment Hysteresis in Australian States and Territories: Evidence from Panel Data Unit Root Tests. The Australian Economic Review, 36, 181-192.
  • Song, F. M., Wu, Y. (1998). Hysteresis Unemployment: Evidence from OECD Countries. The Quarterly Review of Economics and Finance, 38, 181-192.
There are 43 citations in total.

Details

Primary Language Turkish
Journal Section Articles
Authors

Çiler Sigeze This is me 0000-0001-5329-5066

Nuran Coşkun This is me 0000-0002-7803-7968

Esra Ballı 0000-0001-6993-9268

Publication Date March 29, 2019
Submission Date April 12, 2018
Acceptance Date March 26, 2019
Published in Issue Year 2019 Volume: 34 Issue: 1

Cite

APA Sigeze, Ç., Coşkun, N., & Ballı, E. (2019). AB Ülkelerinde ve Türkiye’de İşsizlik Histerisinin Fourier-KPSS Birim Kök Testi ile İncelenmesi. İzmir İktisat Dergisi, 34(1), 15-24. https://doi.org/10.24988/ije.2019341761

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