International Advances in Economic Research

, Volume 13, Issue 3, pp 334–346

Cyclical Asymmetries in Unemployment Rates: International Evidence

Article

Abstract

This paper investigates to what extent the observed nonlinearities in the unemployment rates of six major developed economies are the response to cyclical asymmetries. Two classes of models are compared: strict smooth transition autoregressions and models where the transition variable is GDP growth, which is considered a more direct indicator of the business cycle. The empirical evidence points out that nonlinearities in unemployment rates are induced by cyclical asymmetries. It is also found that in most countries the unemployment rate looks stationary and reverts to a long-run equilibrium rate in periods of normal growth, while in extreme cyclical situations it tends to become nonstationary as if each extreme cyclical episode had its own path of equilibrium.

Keywords

Nonlinearity STAR models Business cycle Unemployment Unit roots 

JEL Classification

E32 E24 C52 

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Copyright information

© International Atlantic Economic Society 2007

Authors and Affiliations

  1. 1.Facultad de Ciencias Economicas y Empresariales, Dpto. Economia Aplicada IIUniversidade da CoruñaCorunnaSpain

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