publication . Book . Preprint . 2005

Unemployment, investment and global expected returns: a panel FAVAR approach

Ron Smith; Gylfi Zoega;
Open Access English
  • Published: 01 Nov 2005
  • Publisher: Birkbeck, University of London
  • Country: United Kingdom
We consider the hypothesis that a common factor, global expected returns, drives unemployment and investment in 21 OECD countries over the period 1960-2002. We investigate this hypothesis using a panel-factor augmented-vector autoregression (FAVAR). We first estimate the common factors of unemployment and investment by principal components and show that the first principal component of unemployment is almost identical to that of investment and that they both show the pattern one would expect of a rate of return as indicated by long interest rates. We then estimate panel FAVARs to measure the dynamic impact of the global factors. Investment appears to drive unemp...
free text keywords: Investment, unemployment, principal components., ems, jel:J1, jel:E2
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Bernanke, B.S., J. Boivin and P. Eiasz (2005) Measuring the Effects of Monetary Policy: A Factor Augmented Vector Autoregressive Approach, Quarterly Journal of Economics, p. 387-422. [OpenAIRE]

Blanchard, O. (2000), The Economics of Unemployment: Shocks, Institutions, and Interactions, Lionel Robbins Lectures, October 2000.

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