Investigating Unemployment Hysteresis in the Philippines: A Vector Autoregressive Model Approach

Date

1-2021

Degree

Bachelor of Science in Economics

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Maria Luisa G. Valera

Committee Member

Gideon P. Carnaje, Maria Luisa G. Valera, Maria Angeles O. Catelo, Agham C. Cuevas

Abstract

Given the peculiar persistence of high unemployment in the Philippines amidst economic growth, this study examines if this behavior can be accounted for by the presence of hysteresis or the dependence of unemployment to its own history and macro variables. The vector autoregressive model (VAR) was adopted in this study using quarterly data from 1998Q1 to 2019Q3. Based on the results, a unit root was found, suggesting that unemployment indeed constituted a hysteretic nature or nonlinear behavior.results of the impulse response functions showed that a one-time shock in unemployment affected a positive change in its own behavior. Whereas the one time shocks of GDP growth, inflation, and interest rate generated a negative response from unemployment. In addition, unemployment exhibited the lowest inertia or rate of adjustment in response to GDP growth among the other variables. On the other hand, results of the forecast error variance decompositions strengthened that unemployment is the most critical factor to its own behavior. It is therefore proven that the history of unemployment and shifts in aggregate demand affect unemployment in the long run.

Language

English

LC Subject

Unemployment, Hysteresis, VAR Model

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993.5 2022 E2 D43

Document Type

Thesis

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