Unemployment dynamics in the UK

This paper examines the determinants of unemployment in terms of its statis tical correlates. At one extreme unemployment has been viewed as highly tre nded in the post war period, with the implication that equilibrium unemploy ment has followed a broadly similar path. Alternatively, unemployment can b e viewed as a highly persistent series that departs for long periods from a more stable equilibria. This paper reports on reduced form models of unemp loyment and suggests that many exogenous variables that have typically been associated with movements in equilibrium unemployment have little explanat ory power. Instead, unemployment may be characterised as a near unit root p rocess driven by a mixture of mean shifting I(0) variables.