Unemployment hysteresis in EU countries: what do we really know about it?

The paper aims to re‐examine the stationarity properties of unemployment rates in 12 European Union (EU) countries over the period 1988: I‐1999: IV.

This paper applies a battery of second‐generation panel unit root tests that allow for cross‐sectional correlation.

The study shows that, contrary to previous empirical literature, hysteresis does not characterise EU unemployment.

This paper uses recent advances in the econometrics of panel unit root tests. The new tests have more power than the traditional ones in detecting the null hypothesis of a unit root.