Autori: Alogoskoufis, G., Stengos, Thanasis
Titolo: Testing for nonlinear dynamics in historical unemployment series
Periodico: European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1991 - Fascicolo: 38 - Pagina iniziale: 1 - Pagina finale: 25

In this paper we have used historical unemployment series for the US and the UK to test the dynamics of a model that has attracted interest in explaining the different unemployment experiences between industrialized countries. The model is an extension of the one used by Alogoskoufis and Manning (1988a, b) and includes most features advanced in the literature to explain these differences. In addition to the usual diagnostics that look at linear deviations from the null of an i.i.d. process we have used the test proposed by Brock, Dechert and Scheinkman (1987) that has power against nonlinear alternatives, including chaotic-deterministic ones. This paper provides an example where this diagnostic can be of value in assessing the adequacy of economic models. Our findings support the idea that the US unemployment and the UK one follow different dynamic specifications with the US unemployment being adequately described by a simple AR(2) process with ARCH errors, as the model suggests. On the other hand the UK unemployment does not seem to follow the above specification. Attempts to correct for the presence of alternative linear specifications did not produce any results. We also found that the nonlinearities present in the unemployment equation residuals do not seem to be of the chaotic variety. It seems to us that more theoretical work is needed to identify the sources of the nonlinear behavior in the U K series.




Testo completo: http://hdl.handle.net/1814/377

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