Abstract

AHEDO GARCIA, Mario Ricardo. Unemployment hysteresis: empirical evidence for the case of Mexico (2006-2023). Prob. Des [online]. 2025, vol.56, n.222, pp.147-169.  Epub Mar 09, 2026. ISSN 0301-7036.  https://doi.org/10.22201/iiec.20078951e.2025.222.70261.

This paper aims to demonstrate that the dynamic properties of unemployment in Mexico can be explained from the point of view of hysteresis, showing that movements in demand caused unemployment rates to deviate from their long-term trend. Unit root tests were performed on two variables which allowed us to understand unemployment. First, in accordance with conventional literature, the unemployment rate was used. Then, following the post-Keynesian view, the percentage of installed capacity utilization was used. Based on the econometric results, we test the hysteresis hypothesis for the unemployment rate and suggest policies aimed at strengthening effective demand, thus increasing the percentage of installed capacity utilization to reduce unemployment levels in Mexico.

Keywords : unemployment dynamics; hysteresis, NAIRU; unit root tests; installed capacity.

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