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Title: Multiple shifts and fractional integration in the us and uk unemployment rates
Authors: Caporale, GM
Gil-Alana, LA
Keywords: Unemployment; Persistence; Long memory; Multiple shifts
Issue Date: 2008
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 08-15.
Abstract: This paper analyses the long-run behaviour of the US and UK unemployment rates by testing for possibly fractional orders of integration and multiple shifts using a sample of over 100 annual observations. The results show that the orders of integration are higher than 0 in both series, which implies long memory. If we assume that the underlying disturbances are white noise, the values are higher than 0.5, i.e., nonstationary. However, if the disturbances are autocorrelated, the orders of integration are in the interval (0, 0.5), implying stationarity and mean-reverting behaviour. Moreover, when multiple shifts are taken into account, unemployment is more persistent in the US than in the UK, implying the need for stronger policy action in the former to bring unemployment back to its original level.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers
Dept of Economics and Finance Research Papers
Dept of Economics and Finance Research Papers

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