ÖZCAN, Burcu Fırat Üniversitesi - İktisadi ve İdari Bilimler Fakültesi - İktisat Bölümü, Turkey

IS UNEMPLOYMENT HYSTERISIS HYPOTHESIS VALID FOR OECD COUNTRIES? THE ANALYSIS OF UNIT ROOT TESTS WITH STRUCTURAL BREAKS

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There are three approaches regarding the movement of unemployment series over time, namely hysteresis hypothesis, natural rate hypothesis, and structuralist approach. The hysteresis hypothesis points out that unemployment series follow unit root process. The natural rate hypothesis indicates unemployment series being stationary, whereas structuralist view implies stationarity in unemployment series with breaks. In this study, we apply unit root tests that allow for breaks developed by Lee and Strazicich (2003) and Im et al. (2005, 2010). We examine the validity of hysteresis hypothesis in both univariate and panel dimensions. The results signal that most unemployment series in OECD countries are in hysteresis effect.

95

Unemployment Hysteresis , Natural Rate Hypothesis , Unit Root Test , Structural Breaks

Erciyes University Journal Of Economics an‎d Administrative Sciences

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