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2020, vol. 48, iss. 4, pp. 7-22
Unemployment rate dynamics in small open economy: The case of Serbia
University of Belgrade, Faculty of Economy
Keywords: unemployment; hysteresis effect; cointegration; VAR model; dynamic relationship
Dynamic relationship among unemployment rate and key macroeconomic variables is explored for the Serbian economy that has been characterized by high unemployment rates since the outcome of the Great Recession. This analysis reveals how effective policy measures can be in reducing unemployment rate. Cointegrated vector autoregressive model is employed for the period 2014-2019. Prior to multivariate dynamic modelling, the validity of hysteresis hypothesis for unemployment rate is assessed. Obtained results show significant negative long-run effect of real wages on unemployment rate, and positive long-run effect of real effective exchange rate appreciation on real wages. For further reduction of unemployment rate demand-side measures should be employed.
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article language: English
document type: Original Scientific Paper
DOI: 10.5937/industrija48-29763
received: 07/11/2020
revised: 17/12/2020
accepted: 20/12/2020
published online: 31/12/2020
published in SCIndeks: 12/01/2021
peer review method: double-blind
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