FLEXIBLE FOURIER STATIONARY TEST IN UNEMPLOYMENT FOR G-7 COUNTRIES

In this study, we apply flexible Fourier unit root test proposed by Enders and Lee (2004, 2009) to re-examine the hysteresis hypothesis in unemployment for G-7 countries over the 1980M1 to 2008M6. We find that Fourier stationary unit root test has higher power than linear method if the true data generating process of unemployment is stationary non-liner process of an unknown form with structural change. The hysteresis in unemployment is confirmed for all G-7 countries, with the exception of Japan, when Enders and Lee’s (2004, 2009) Fourier unit root test is conducted.