The Dynamics of Unemployment in Poland from 1992 to 2017
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University of Agriculture in Kraków, Institute of Economic and Social Sciences, Department of Economics and Economic Policy
Publish date: 2019-03-21
Submission date: 2018-04-25
Acceptance date: 2019-01-16
Gospodarka Narodowa 2019;297(1):135–149
Two alternative approaches can be found in the literature on the dynamics of unemployment. The first approach is based on the theory of a natural rate of unemployment. Under this theory, the economy can depart from the natural rate of unemployment in the short term due to nominal shocks, but in the long term the economy is expected to achieve an equilibrium indicated by the natural rate of unemployment. The second approach to the dynamics of unemployment is the so-called hysteresis of unemployment theory. According to this theory, all shocks to unemployment will have a permanent effect on the natural rate of unemployment. In a statistical sense, these two theories boil down to testing the unit root. If the unemployment rate is a non-stationary series with a unit root, then the hysteresis-in-unemployment hypothesis has to be accepted. On the other hand, if the unemployment rate is a stationary series then the hysteresis hypothesis is rejected in favour of the natural rate theory. In the study, the rate of unemployment in Poland is analysed in the period from 1992 (Q2) to 2017 (Q4). Threshold autoregressive model applied to the data indicates that the unemployment rate in Poland is a nonlinear process and, therefore, supports the hysteresis of unemployment theory.