Copied Spanish Regional Unemployment
Spanish Regional Unemployment
This work investigates the time series properties of the unemployment rate of the Spanish regions over the period 1976-2011. For that purpose,the authorsemploy the PANIC procedures of Bai and Ng (2004), which allows to decompose the observed unemployment rate series into common factor and idiosyncratic components. This enablesthe authorsto identify the exact source behind the hysteretic behaviour found in Spanish regional unemployment. Overall,the analysis with three different proxies for the excess of labour supply renders strong support for the hysteresis hypothesis, which appears to be caused by a common stochastic trend driving all the regional unemployment series. In the second part of the analysisthe authorstry to determine the macroeconomic and institutional factors that are able to explain the time series evolution of the common factor, and in turn help us shed light on the ultimate sources of hysteresis.Thereadershall see how the variables that the empirical analysis emphasises as relevant closely fit into the main causes of the Spanish unemployment behaviour. Finally, some policy considerations drawn fromthe results are presented.
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