Politická ekonomie
Politická ekonomie
Prague Economic Papers
University of Economics, Prague

Prague Economic Papers Vol. 24 No. 5

Hysteresis and the NAIRU: The Case of Countries in Transition

DOI: https://doi.org/10.18267/j.pep.526

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Gordana Marjanovic, Ljiljana Maksimovic, Nenad Stanisic

The paper examines the hysteresis hypothesis in unemployment in the case of eight selected countries in transition, using the Kalman filter and testing whether the NAIRU time series are stationary. The empirical results show that the hysteresis effect is confirmed for the majority of the countries. Testing the influence of the inflation growth rate on the decline in the NAIRU and vice versa, performed using the panel regression with fixed effect, confirmed that the increase in inflation leads to decline in the NAIRU. The conclusion also suggests the existence of the impact of actual unemployment rate on the NAIRU, which may be affected by the change in aggregate demand.

Keywords: hysteresis, inflation, Kalman filter, NAIRU, unemployment

JEL Classification: C13, E24, E30, E50

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