The Persistence of Unemployment in Switzerland: Some Empirical Results

This paper estimates the persistence of shocks to Swiss unemployment. Parametric as well as a non-parametric measures of persistence indicate that the long run impact of shocks to unemployment is larger than their short run effect. Furthermore, the measures show clearly higher values for the official rate than for the level of unemployment. This is not surprising given the official method of computation of the unemployment rate, which seems to introduce a "potential break" in the series and may bias unit root and persistence measures. The conjecture that unemployment persistence is higher in a increasing state than in a decreasing state is confirmed by the estimation results for a Markov switching AR(2) model for the seasonal differences of unemployment.