Unemployment Hysteresis in Asian Countries: Findings Based on Flexible Fourier Form and Structural Break Unit Root Tests

Abstract

The present paper investigates unemployment hysteresis in 47 Asian countries using annual data from 1991 to 2019. A novel unit root framework, capable of modelling nonlinearity in the form of smooth break is applied due to the small sample sizes of the unemployment data. The results show evidence of hysteresis in most of the Asian countries except in Brunei, Malaysia, Qatar and Turkey. Labour markets in those countries with unemployment hysteresis therefore need to be proactive in their policies to address unemployment shocks, particularly those wealthy Asian nations among them.