Abstract

GARCIA-CINTADO, Alejandro C.; ROMERO-AVILA, Diego  and  USABIAGA, Carlos. PANIC in Spanish Unemployment. El trimestre econ [online]. 2016, vol.83, n.331, pp.611-646. ISSN 2448-718X.  https://doi.org/10.20430/ete.v83i331.213.

This paper investigates the stochastic properties of Spanish regional unemployment rates using quarterly data spanning the period 1976(1)-2013(2). Towards this end, we employ the Panel Analysis of Nonstationarity in Idiosyncratic and Common components (PANIC) procedures of Bai and Ng (2004, 2010), which allow for the decomposition of the observed unemployment rate series into a common component and an idiosyncratic component. This enables us to identify the exact source behind the nonstationary behavior in Spanish regional unemployment. Our analysis provides clear-cut evidence for the hysteresis hypothesis, which appears to be caused by a common stochastic trend driving all the regional unemployment series. These results are largely backed up by those obtained from the median-unbiased estimation of the persistence parameter which equals one for the common factor and to a lesser extent from the half-life estimate obtained from impulse-response functions that equals 12.5 years for the case of shocks hitting the common trend. This persistence analysis also provides evidence of stationarity for most of the idiosyncratic series (two regions being the exception), as found in the PANIC analysis.

Keywords : Unemployment Rate; Persistence; PANIC Analysis; Common Factor; Median-Unbiased Estimation; Half-Life of a Shock.

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