Authors

• Luis A. Gil-Alana(alana@unav.es)
  School of Economics and Business Administration, University of Navarra, Spain.
• Guglielmo M. Caporale(Guglilemo-Maria.Caporale@brunel.uk.ac)
  Brunel University, London, England

Abstract
A general procedure for fractional integration and structural breaks at unknown points in time is used, which allows for different orders of integration and deterministic components in each subsample. First, the procedure is extended to the non-linear case, and is shown by means of Monte Carlo experiments that it performs well in a non-linear environment. Second, it is applied to test for a single break in the unemployment rate in the US, the UK and Japan. The results shed some light on the empirical relevance of alternative unemployment theories for these countries. Specifically, a structuralist interpretation appears more appropriate for the US and Japan, whilst a hysteresis model accounts better for the UK experience (and also for the Japanese one in the second subsanple). These findings are interpreted in terms of structural instability in labor markets with different features.

Number of Pages:46

Creation Date:2008-11-20

Number:null/08