Two important empirical features of US unemployment are that shocks to the series seem rather persistent and that it seems to rise faster during recessions than that it falls during expansions. To jointly capture these features of long memory and nonlinearity, we put forward a new time series model and evaluate its empirical performance. We find that the model describes the data rather well and that it outperforms related competitive models on various measures of fit.

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Journal of Econometrics
Erasmus Research Institute of Management

van Dijk, D., Franses, P. H., & Paap, R. (2002). A nonlinear long memory model, with an application to US unemployment. In Journal of Econometrics (Vol. 110, pp. 135–165). doi:10.1016/S0304-4076(02)00090-8