Please use this identifier to cite or link to this item: http://buratest.brunel.ac.uk/handle/2438/970
Title: Non-Linearities And Fractional Integration In The Us Unemployment Rate
Authors: Caporale, GM
Gil-Alana, LA
Keywords: Unemployment, Asymmetries, Nonlinearities, Fractional Integration, Persistence,;Long Memory.
Issue Date: 2004
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 04-17
Abstract: This paper proposes a model of the US unemployment rate which accounts for both its asymmetry and its long memory. Our approach introduces fractional integration and nonlinearities simultaneously into the same framework (unlike earlier studies employing a sequential procedure), using a Lagrange Multiplier procedure with a standard null limit distribution. The empirical results suggest that the US unemployment rate can be specified in terms of a fractionally integrated process, which interacts with some non-linear functions of the labour demand variables (real oil prices and real interest rates). We also find evidence of a long-memory component. Our results are consistent with a hysteresis model with path dependency rather than a NAIRU model with an underlying unemployment equilibrium rate, thereby giving support to more activist stabilisation policies. However, any suitable model should also include business cycle asymmetries, with implications for both forecasting and policy-making.
URI: http://bura.brunel.ac.uk/handle/2438/970
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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