Testing Hysteresis in Unemployment in G7 Countries Using Quantile Unit Root Test with both Sharp Shifts and Smooth Breaks
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We apply a Quantile unit root test with both Sharp Shifts and Smooth Breaks to revisit hysteresis in unemployment for G7 countries using data for the period 1980–2017. Results from the conventional unit root tests indicate that hysteresis in unemployment does hold in half of these G7 countries during the period 1980–2017. A quantile Kolmogorov–Smirnov test fails to reject hysteresis in the unemployment hypothesis for our quarterly data but not in monthly data in G7 countries. Empirical results from our proposed quantile unit root test considering both sharp shifts and smooth breaks indicate that hysteresis in unemployment can be rejected over certain quantiles. A quantile Kolmogorov–Smirnov test results demonstrating hysteresis in unemployment does not hold in G7 countries for both monthly and quarterly data. These empirical findings have important policy implications in G7 countries.
KeywordsQuantile unit root test Hysteresis Unemployment Sharp shifts and smooth breaks
JEL ClassificationC12 C22 E24
The first author, Yushi Jiang acknowledges financial support from National Natural Science Foundation of China in 2014. No: 71572156. The second Author, Yifei Cai acknowledges the support of “ University Postgraduate Award (UPA) and an Australian Government Research Training Program Scholarship (RTP)” at The University of Western Australia.
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