Decoding unemployment persistence: an econometric framework for identifying and comparing the sources of persistence with an application to UK macrodata

Niels Framroze Møller*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

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Abstract

Most econometric analyses of persistence focus on the existence of non-stationary unemployment but not the origin of this. The present research contains a multivariate econometric framework for identifying and comparing different sources of unemployment persistence (e.g., slow adjustment versus a slowly moving equilibrium rate). The framework contains readily applicable formulas for testing different hypotheses of persistence and is used to identify the causes of this in the UK macroeconomy. The evidence suggests that persistence has been due to a slowly moving equilibrium, driven by the price of crude oil, and not to slow adjustment, for example as related to the process of wage formation, as has often been emphasized.

Original languageEnglish
JournalEmpirical Economics
Volume56
Issue number5
Pages (from-to)1489-1514
ISSN0377-7332
DOIs
Publication statusPublished - 2019

Keywords

  • Cointegration
  • Equilibrium unemployment
  • UK unemployment
  • Unemployment hysteresis
  • Unemployment persistence
  • Unit root hysteresis

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