On the interpretation of panel unit root tests

ABSTRACTThe popularity of inflation targeting has risen in the last decade and the number of countries that adopted inflation targeting as their monetary policy framework surpassed 40 by the end of 2016. This study analyzes whether inflation targeting around the world has been successful in terms of achieving the announced target and keeping inflation rate around it. We argue that a successful inflation targeting necessitates the deviation of inflation from the target be stationary. We employ both time series and panel unit root tests in order to analyze the stationarity properties of deviation of inflation from the target. Results of unit root tests provide evidence in favor of the success of inflation targeting framework around the world. ¿HAN SIDO EXITOSAS LAS METAS DE INFLACIÓN? RESULTADOS DE LAS PRUEBAS DE RAÍZ UNITARIARESUMENLa popularidad de las metas de inflación ha aumentado en la última década y el número de países que adoptaron metas de inflación como su marco de política monetaria sobrepasó los 40 a finales del 2016. Este estudio analiza si las metas de inflación alrededor del mundo han tenido éxito en términos de alcanzar el objetivo anunciado y mantener la tasa de inflación alrededor de su meta. Argumentamos que una meta exitosa de inflación requiere que la desviación de la inflación respecto a la meta sea estacionaria. Empleamos tanto series de tiempo como pruebas de raíz unitaria en panel con el fin de analizar las propiedades estacionarias de la desviación de la inflación en relación con el objetivo. Los resultados de las pruebas de raíz unitaria proporcionan evidencia a favor del éxito del marco de metas de inflación en todo el mundo.

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Can the insider–outsider theory explain unemployment hysteresis in OECD countries?

Oxford Economic Papers ◽

10.1093/oep/gpz026 ◽

2019 ◽

Vol 72 (1) ◽

pp. 149-163

Author(s):

Dimitrios Bakas ◽

Yousef Makhlouf

Keyword(s):

Labour Market ◽

Empirical Evidence ◽

Unemployment Rate ◽

Unit Root ◽

Oecd Countries ◽

Unit Root Tests ◽

Panel Unit Root Tests ◽

Panel Unit Root ◽

Hysteretic Behaviour

Abstract Insider–outsider theory is often used as a basis for explaining the hysteretic behaviour of unemployment. Despite this, there is no empirical evidence about the validity of this theory on explaining the persistence of unemployment. This article addresses this gap, using various labour market proxies of insiders’ power for the OECD countries over 1960–2013 and employing panel unit root tests that exploit the information contained in these proxies. The results show that although the unemployment rate exhibits a pronounced hysteretic behaviour in OECD countries, this behaviour is reversed once we account for the insider–outsider proxies. Our findings thus validate the role of the insider–outsider theory as a key source of unemployment hysteresis.

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