Evidence concerning non-linear structure in Canadian provincial unemployment rates

In this paper we examine Canadian provincial unemployment data for evidence of significant non-linear structure. Recent work on unemployment persistence, see Nickell (1990), suggests that the reduced form unemployment equations can be modelled by linear autoregressions. Our findings are consistent with the above literature and also confirm the results of Frank and Stengos (1988b) for the aggregate Canadian unemployment series. To test for the presence of non-linear effects we employ a test by Brock et al. (1987) which is derived from the non-linear dynamics literature.