Studies using standard unit-root tests generally cannot reject the hypothesis of a unit root in unemployment rates. These findings have been interpreted as supporting the hysteresis hypothesis. The authors demonstrate that the failure to reject the null may be due to the low power of the tests....

Can rational stochastic asset bubbles help explain the excess volatility of stock prices? The bubble considered here is treated as an unobserved state vector in the state-space model and is easily estimated using the Kalman filter. The author finds that the bubble components estimated account...