SSE/EFI Working Paper Series in Economics and Finance
No 262:
Modelling asymmetries and moving equilibria in unemployment rates
Joakim Skalin ()
and Timo Teräsvirta ()
Abstract: The paper discusses a simple univariate nonlinear
parametric time-series model for unemployment rates, focusing on the
asymmetry observed in many OECD unemployment rate series. The model is
based on a standard logistic smooth transition autoregressive (LSTAR) model
for the first difference of unemployment, but it also includes a lagged
level term. This model allows for asymmetric behaviour by permitting
'local' nonstationarity in a globally stable model. Linearity tests are
performed for a number of quarterly, seasonally unadjusted, unemployment
series from OECD countries, and linearity is rejected for a number of them.
For a number of series, nonlinearity found by testing can be modelled
satisfactorily by use of our smooth transition autoregressive model. The
properties of the estimated models, including persistence of the shocks
according to them, are illustrated in various ways and discussed. Possible
existence of moving equilibria in series not showing asymmetry is
investigated and modelled with another STAR model.
Keywords: Persistence; nonlinearity; smooth transition regression; time series model; linearity test; (follow links to similar papers)
JEL-Codes: C22; E24; E32; (follow links to similar papers)
55 pages, September 28, 1998, Revised July 8, 1999
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- This paper is published as:
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Skalin, Joakim and Timo Teräsvirta, (2002), 'Modeling asymmetries and moving equilibria in unemployment rates', Macroeconomic Dynamics, Vol. 6, pages 202-241
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