A Markov-switching structural vector autoregressive model of boom and bust in the Australian labour marketEmpirical Economics
Date of this Version2-28-2015
Document TypeJournal Article
AbstractMajor economic events, such as the global financial crisis, are episodes of identifiable duration that differ from other time periods. Using monthly data on the unemployment rate, labour force participation rate and employment for Australia for the period from 1978 to 2012, we estimate a Markov-switching SVAR model to examine the relationship between unemployment and labour force participation and the performance of the Australian labour market. Three distinct labour market regimes are identified. We find that the labour market switches between periods of low unemployment and high participation, prolonged periods of relative stability and short, sharp periods of high unemployment and low participation. A key finding is that, due to the behaviour of workers not in the labour force, the long-term effect of an upswing in labour hiring results in a lower unemployment rate and a lower labour force participation rate.
Citation InformationNoel Gaston and Gulasekaran Rajaguru. "A Markov-switching structural vector autoregressive model of boom and bust in the Australian labour market" Empirical Economics Vol. 49 Iss. 4 (2015) p. 1271 - 1299 ISSN: 0377-7332
Available at: http://works.bepress.com/gulasekaran_rajaguru/21/