Mean reversion in the US unemployment rate - evidence from bootstrapped out-of-sample forecasts

This article investigates whether the US unemployment rate is best described as a unit-root or mean-reverting process. An out-of-sample forecast exercise is conducted in which the performance of an autoregressive (AR) model with an imposed unit root is compared with that of a mean-reverting AR model. A bootstrap distribution for the relative root mean square forecast error is generated and provides strong support for mean reversion in the US unemployment rate.

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Year of publication:	2011
Authors:	Gustavsson, Magnus ; Osterholm, Par
Published in:	Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 18.2011, 7, p. 643-646
Publisher:	Taylor & Francis Journals

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009202580