Empirical Economics

, Volume 38, Issue 3, pp 779–792 | Cite as

The presence of unemployment hysteresis in the OECD: what can we learn from out-of-sample forecasts?

Original Paper
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Abstract

This paper investigates the relevance of unemployment hysteresis in seventeen OECD countries. We employ an out-of-sample forecast exercise in which a mean-reverting autoregressive model is compared to an autoregressive model with an imposed unit root. A substantial difference in forecasting performance between the two models is established for many countries, but the results are mixed in their strength. The evidence for unemployment hysteresis in Austria, Finland, Iceland, Israel, Italy, Japan and Sweden is, however, convincing. For no country can unambiguous support for a mean reverting unemployment rate be found.

Keywords

Unit root Persistence Labour market 
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Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  1. 1.Department of EconomicsUppsala UniversityUppsalaSweden
  2. 2.National Institute of Economic ResearchStockholmSweden

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