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

    Smith, Ron P. and Zoega, Gylfi (2005) Unemployment, investment and global expected returns: a panel FAVAR approach. Working Paper. Birkbeck, University of London, London, UK.

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    Abstract

    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 unemployment and – allowing for a moving natural rate of unemployment driven by the global factor – produces much faster adjustment by unemployment.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 0524
    Keyword(s) / Subject(s): Investment, unemployment, principal components
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Innovation Management Research, Birkbeck Centre for
    Depositing User: Administrator
    Date Deposited: 29 Mar 2019 13:42
    Last Modified: 15 Oct 2019 10:07
    URI: http://eprints.bbk.ac.uk/id/eprint/26978

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