Akademik Veri Yönetim Sistemi
TURKISH ECONOMIC ASSOCIATION INTERNATIONAL CONFERENCE ON ECONOMICS ICE-TEA 2018, Antalya, Türkiye, 1 - 03 Kasım 2018, ss.2046-2089
This paper investigates the persistence of Spanish unemployment by incorporating the output
gap over the period of 1972-2015. Unlike to the existing literature which identifies labor market
rigidity as the triggering factor of high unemployment, we utilize output gap extracted by
Kalman filter in order to discriminate between impacts originated from (demand side) shocks
and labor market institutions. Time-varying parameter approach allowing for both abrupt and
smooth structural changes of parameters facilitates to explore the evolution of the persistence
in the country whose history is full of crises and labor market reforms. The presence of lags
between the implementation of the policy and its influence on the economy and the interactions
between the shocks induce direction towards the gradual changes in Spain. Moreover, the model
enables to scrutinize the natural rate or hysteresis hypothesis for each period without restricting
the analysis into a dichotomous framework. Estimation results providing evidence in favor of
hysteretic effects during the late 1970s and the early 1980s reveal a declining (rising) coefficient
for lagged unemployment (output gap) in the subsequent years. Whereas abrupt changes of
coefficients after 1984 and 1994 reforms coincided with the start of recovery phases, smooth
transition of persistence coefficient after 2008 underlies different dynamics.