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Article HYSTERESIS HYPOTHESIS VS. STRUCTURALIST VIEW IN CANADA: A NEW TEST FOR THE SHARP BREAK AND SMOOTH SHIFT(Acad Economic Studies, 2021) Bolat, Suleyman; Belke, Murat; Omay, TolgaWe have investigated the hysteresis hypothesis using a newly proposed unit root test which considers both sharp breaks and smooth shifts in its testing process for Canada during the period 1960-2019 in this study. The so-called unit root test allows researchers control for sharp breaks such as crises, smooth shifts such as nonlinearities, simultaneously. In proposing this highly complex trend structure, we are also proposing a new way for the macroeconomic theorist to model the unemployment rate following the structuralist view. It takes into account the structural breaks and possible nonlinearities as form of smooth shifts which leads to a new form of structuralist view. The empirical results display that the unemployment rates in Canada follow a non-hysteresis path under the presence of sharp and smooth structural breaks.Article Citation - WoS: 11Testing the Hysteresis Effect in the Us State-Level Unemployment Series(Routledge Journals, Taylor & Francis Ltd, 2020) Omay, Tolga; Ozcan, Burcu; Shahbaz, MuhammedThis paper re-examines the stochastic time series behaviour of the monthly unemployment rate in 50 states of the United States (US) for the period 1976-2017 using a number of state-of-the-art unit root tests. The new developments incorporate structural break, nonlinearity, asymmetry, and cross-sectional correlation within panel-data estimation including the use of a sequential panel selection method. While not previously considered, sequential panel selection enabled us to determine and separate the stationary and nonstationary series in the sample. The empirical findings are in support of the stationarity of unemployment rate in 47 states. The findings confirm a natural rate hypothesis for the labour markets in the most US states, indicating that labour market shocks have solely temporary effects on state-level unemployment. This empirical study provides significant state-specific policy implications.
