Research output: Contribution to Journal/Magazine › Journal article › peer-review
Hysteresis and Cyclical Variability in Real Wages, Output and Unemployment: Empirical Evidence from Non-Linear Methods for the United States. / Peel, David; Speight, A.
In: International Journal of Systems Science , Vol. 25, No. 5, 1994, p. 934-965.Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Hysteresis and Cyclical Variability in Real Wages, Output and Unemployment: Empirical Evidence from Non-Linear Methods for the United States
AU - Peel, David
AU - Speight, A.
PY - 1994
Y1 - 1994
N2 - Whether the equilibria towards which economic variables gravitate are stable or exhibit historic path dependence (i.e. hysteresis) is of central importance for the efficacy of stabilization policy. Given that such hysteresis is a natural consequence of nonlinearity in the conditional mean of the data generating process, we lest for the presence of hysteretic path dependence by examining the time series properties of monthly U.S. aggregate and disaggregate data over the post Bretton Woods period 1971-1993. Our results suggest that such nonlinearity is indeed present and capable of representation using bilinear and threshold autoregressive models, estimates implying strong asymmetry in the behaviour of our series with recessionary periods being inherently more‘'noisy’. Finally, we consider generalized threshold vector autoregressive models where threshold regimes are conditioned on the sign of the change in the growth rate of industrial production (i.e. the ‘business cycle’). These models reveal that cyclical behaviour of unemployment and the real wage is complex, being procyclical during business cycle expansions but countercyclical and independent, respectively, during contractions.
AB - Whether the equilibria towards which economic variables gravitate are stable or exhibit historic path dependence (i.e. hysteresis) is of central importance for the efficacy of stabilization policy. Given that such hysteresis is a natural consequence of nonlinearity in the conditional mean of the data generating process, we lest for the presence of hysteretic path dependence by examining the time series properties of monthly U.S. aggregate and disaggregate data over the post Bretton Woods period 1971-1993. Our results suggest that such nonlinearity is indeed present and capable of representation using bilinear and threshold autoregressive models, estimates implying strong asymmetry in the behaviour of our series with recessionary periods being inherently more‘'noisy’. Finally, we consider generalized threshold vector autoregressive models where threshold regimes are conditioned on the sign of the change in the growth rate of industrial production (i.e. the ‘business cycle’). These models reveal that cyclical behaviour of unemployment and the real wage is complex, being procyclical during business cycle expansions but countercyclical and independent, respectively, during contractions.
U2 - 10.1080/00207729408929009
DO - 10.1080/00207729408929009
M3 - Journal article
VL - 25
SP - 934
EP - 965
JO - International Journal of Systems Science
JF - International Journal of Systems Science
SN - 0020-7721
IS - 5
ER -