Title: European unemployment nonlinear dynamics over the business cycles: Markov switching approach

Authors: Marianna Oliskevych; Iryna Lukianenko

Addresses: Department of Mathematical Economics and Econometrics, Ivan Franko National University of Lviv, 1, Universytetska Str., 79000 Lviv, Ukraine ' Department of Finance, National University of 'Kyiv-Mohyla Academy', 10, VoloskaStr, 04655 Kyiv, Ukraine

Abstract: The dynamics of European unemployment showed considerable fluctuations and asymmetric behaviour during business cycles over the past decade. The dynamic pattern of unemployment rate demonstrated the significant differences for different countries during its growth and decline periods. To describe the differences in dynamic properties of unemployment rate in different countries and economic situation, we developed the Markov switching autoregressive models with time-varying probabilities of transition between behaviour regimes. The results revealed that the unemployment rate in EU countries during 2000-2016 behaved asymmetrically over the business cycle. Therefore, we got different processes for describing unemployment dynamics in each phase of the economy.

Keywords: unemployment rate; regime switching model; Markov chain; autoregression; labour market; econometric modelling; asymmetry.

DOI: 10.1504/GBER.2020.107455

Global Business and Economics Review, 2020 Vol.22 No.4, pp.375 - 401

Received: 28 Feb 2018
Accepted: 13 Jun 2018
Published online: 29 May 2020 *

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