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What determines unemployment in the long run? : Band spectrum regression on ten countries, 1913-2016

Hegelund, Erik LU and Taalbi, Josef LU (2019) In Lund Papers in Economic History. Education and the Labour Market
Abstract
This paper presents an empirical analysis of the relation between un-
employment and macroeconomic performance. A strong correlation has
been pointed out before, but a crucial question is over what time-horizon
this holds. To the best of our knowledge, no previous cross-country study
has shown that there is a long-run relationship between unemployment
and macroeconomic performance over a time-period that stretches before
the 1960s. To address this issue, we use wavelet analysis to decompose the
time series into short, medium and long-run variations, and band spec-
trum regressions on the relation between unemployment, GDP, invest-
ment, long-term interest rate and TFP, covering ten countries... (More)
This paper presents an empirical analysis of the relation between un-
employment and macroeconomic performance. A strong correlation has
been pointed out before, but a crucial question is over what time-horizon
this holds. To the best of our knowledge, no previous cross-country study
has shown that there is a long-run relationship between unemployment
and macroeconomic performance over a time-period that stretches before
the 1960s. To address this issue, we use wavelet analysis to decompose the
time series into short, medium and long-run variations, and band spec-
trum regressions on the relation between unemployment, GDP, invest-
ment, long-term interest rate and TFP, covering ten countries 1913-2016.
This methodology has several advantages compared to standard econo-
metrical methods and other tools for decomposition. Our results show
that unemployment correlates negatively with the long-run components
of investment. This suggests that aggregate demand and capital formation
inuence long-term labor market outcomes. According to our estimates
ca 17-percent of overall variations in unemployment and 29 percent of
the long-run variations may be explained by long-run variations in capital
formation. (Less)
Please use this url to cite or link to this publication:
author
and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
in
Lund Papers in Economic History. Education and the Labour Market
issue
2019:203
pages
25 pages
language
English
LU publication?
yes
id
c32ea6fa-7b88-4a5e-bc3a-feffaf2f687c
date added to LUP
2019-04-10 09:22:37
date last changed
2019-04-10 09:22:37
@misc{c32ea6fa-7b88-4a5e-bc3a-feffaf2f687c,
  abstract     = {{This paper presents an empirical analysis of the relation between un-<br/>employment and macroeconomic performance. A strong correlation has<br/>been pointed out before, but a crucial question is over what time-horizon<br/>this holds. To the best of our knowledge, no previous cross-country study<br/>has shown that there is a long-run relationship between unemployment<br/>and macroeconomic performance over a time-period that stretches before<br/>the 1960s. To address this issue, we use wavelet analysis to decompose the<br/>time series into short, medium and long-run variations, and band spec-<br/>trum regressions on the relation between unemployment, GDP, invest-<br/>ment, long-term interest rate and TFP, covering ten countries 1913-2016.<br/>This methodology has several advantages compared to standard econo-<br/>metrical methods and other tools for decomposition. Our results show<br/>that unemployment correlates negatively with the long-run components<br/>of investment. This suggests that aggregate demand and capital formation<br/>inuence long-term labor market outcomes. According to our estimates<br/>ca 17-percent of overall variations in unemployment and 29 percent of<br/>the long-run variations may be explained by long-run variations in capital<br/>formation.}},
  author       = {{Hegelund, Erik and Taalbi, Josef}},
  language     = {{eng}},
  note         = {{Working Paper}},
  number       = {{2019:203}},
  series       = {{Lund Papers in Economic History. Education and the Labour Market}},
  title        = {{What determines unemployment in the long run? : Band spectrum regression on ten countries, 1913-2016}},
  url          = {{https://lup.lub.lu.se/search/files/62880512/LUPEH_203.pdf}},
  year         = {{2019}},
}