Are Shocks to Unemployment Rate in OECD Countries Permanent or Temporary? Evidence From Unit Root Tests With Non-normal Errors

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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A revisit of the unemployment rate, interest rate, GDP growth and Inflation of Pakistan: Whether Structural break or unit root?

iRASD Journal of Economics ◽

10.52131/joe.2021.0302.0027 ◽

2021 ◽

Vol 3 (2) ◽

pp. 80-92

Author(s):

Sara Muhammadullah ◽

Amena Urooj ◽

Faridoon Khan

Keyword(s):

Interest Rate ◽

Unemployment Rate ◽

Unit Root ◽

Structural Breaks ◽

Inflation Rate ◽

Structural Break ◽

Unit Root Test ◽

Unit Root Tests ◽

Gdp Growth ◽

Macroeconomic Indicators

The study investigates the query of structural break or unit root considering four macroeconomic indicators; unemployment rate, interest rate, GDP growth, and inflation rate of Pakistan. The previous studies create ambiguity regarding the stationarity and non-stationarity of these variables. We employ Zivot & Andrews (1992) unit root test and Step Indicator Saturation (SIS) method for multiple break detection in mean. GDP growth and inflation rate are stationary at level whereas unit root tests fail to reject the null hypothesis of the unemployment rate and interest rate at level. However, Zivot and Andrew unit root test with a single endogenous break indicates that the unemployment rate and interest rate are stationary at level with a single endogenous break. On the other hand, the SIS method reveals that the series are stationary with multiple structural breaks. It is inferred that it is inappropriate to take the first difference of the unemployment rate and interest rate to attain stationarity. The results of this study confirmed that there exist multiple breaks in the macroeconomic variables considered in the context of Pakistan.

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Considering nonlinearity and structural changes in the convergence of clean energy consumption: the case of OECD countries

Management of Environmental Quality An International Journal ◽

10.1108/meq-03-2020-0047 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Veli Yilanci ◽

Muhammed Sehid Gorus

Keyword(s):

Energy Consumption ◽

Unit Root ◽

Energy Use ◽

Clean Energy ◽

Oecd Countries ◽

Unit Root Tests ◽

Panel Unit Root Tests ◽

Stochastic Convergence ◽

Panel Unit Root ◽

Content Type

PurposeIn this study, we aim to test the stochastic convergence of per capita clean energy use in 30 OECD (Organization for Economic Co-operation and Development) countries for the period of 1965–2017.Design/methodology/approachThis study employed both linear and nonlinear panel unit root tests, and unlike other studies, this study allowed fractional values in addition to integer values for frequencies in the Fourier functions. Integer values of frequency indicate temporary breaks, while fractional values show permanent breaks.FindingsThe results of the linear panel unit root test indicate that clean energy use does not converge to group average for almost all OECD countries. However, the results of nonlinear panel unit root tests provide evidence that the stochastic convergence hypothesis of clean energy consumption cannot be rejected for most countries. This study does not find any evidence for stochastic convergence of clean energy use in Australia, Canada, Denmark, Ireland, Norway or Sweden. Therefore, the policies regarding clean energy are mandatory in these countries due to their effectiveness. This study also reveals that there are permanent structural breaks in the convergence process of clean energy consumption in approximately half of OECD countries.Originality/valueThis study considers temporary and permanent smooth structural shifts in addition to nonlinearity when testing the stationarity of clean energy consumption in a country i relative to the group average. This new method eliminates deficiencies of the previous panel data techniques. Thus, it provides more reliable results compared to existing literature.

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The purchasing power parity revisited: New evidence for 16 OECD countries from panel unit root tests with structural breaks

Journal of International Financial Markets Institutions and Money ◽

10.1016/j.intfin.2006.08.002 ◽

2008 ◽

Vol 18 (2) ◽

pp. 137-146 ◽

Cited By ~ 14

Author(s):

Paresh Kumar Narayan

Keyword(s):

Purchasing Power Parity ◽

Unit Root ◽

Structural Breaks ◽

Oecd Countries ◽

Unit Root Tests ◽

Purchasing Power ◽

Panel Unit Root Tests ◽

Power Parity ◽

Panel Unit Root ◽

New Evidence

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PPP in the 34 OECD countries: evidence from quantile-based unit root tests with both smooth and sharp breaks

Applied Economics ◽

10.1080/00036846.2017.1403562 ◽

2017 ◽

Vol 50 (23) ◽

pp. 2622-2634 ◽

Cited By ~ 3

Author(s):

Mohsen Bahmani-Oskooee ◽

Tsung-Pao Wu

Keyword(s):

Unit Root ◽

Oecd Countries ◽

Unit Root Tests ◽

Sharp Breaks

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IS THE CONSUMPTION-INCOME RATIO STATIONARY? EVIDENCE FROM LINEAR AND NON-LINEAR PANEL UNIT ROOT TESTS FOR OECD AND NON-OECD COUNTRIES*

Manchester School ◽

10.1111/j.1467-9957.2011.02272.x ◽

2012 ◽

Vol 81 (1) ◽

pp. 102-120 ◽

Cited By ~ 13

Author(s):

MARIO CERRATO ◽

CHRISTIAN DE PERETTI ◽

CHRIS STEWART

Keyword(s):

Unit Root ◽

Oecd Countries ◽

Unit Root Tests ◽

Panel Unit Root Tests ◽

Panel Unit Root ◽

Non Linear ◽

Income Ratio

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The random walk in the stock prices of 18 OECD countries

Journal of Economic Studies ◽

10.1108/jes-03-2015-0053 ◽

2016 ◽

Vol 43 (4) ◽

pp. 598-608

Author(s):

Hassan Shirvani ◽

Natalya V. Delcoure

Keyword(s):

Unit Root ◽

Stock Prices ◽

Unit Roots ◽

Oecd Countries ◽

Unit Root Tests ◽

Panel Unit Root Tests ◽

Cross Sectional ◽

Panel Unit Root ◽

Content Type ◽

Long Run

Purpose The purpose of this paper is to examine the presence of unit roots in the stock prices of 16 OECD countries. Design/methodology/approach Heterogeneous panel unit root tests developed by Im et al. (1997/2003) and Pesaran (2007). Findings Under the assumption of cross-sectional independence across the panel, the authors find no evidence of unit roots, thus failing to reject mean reversion in the stock prices for all the countries in the sample. However, under the assumption of cross-sectional dependence, an assumption borne out by the diagnostic test results, the authors find support for the presence of unit roots in the stock prices. Practical implications Thus, the use of more robust panel unit root tests seems to raise questions about the long-run predictability of the stock market, at least in the context of the OECD countries. Originality/value Thus, it seems that in the long run, an investment policy of buy and hold has still much to offer.

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