Has the unemployment switched between multiple equilibria?
Arbeidsnotat 1998/2, 47 p. ISSN 0801-2504. ISBN 82-7553-121-7.
Market imperfections may cause economies to get stuck at different self- perpetuating levels of activity and unemployment. In such models with multiple equilibria, unemployment may evolve around a certain equilibrium until a shock causes a transition to another. The Markov regime switching model is employed to take account of possible multiple equilibria in Norwegian unemployment since 1972. A proposed procedure is used to identify the shocks behind the transitions between equilibria.