Hysteresis in Unemployment: Old and New Evidence
By Laurence M. Ball. 2009
236 citations recorded by the source corpus.
This paper argues that hysteresis helps explain the long-run behavior of unemployment. The natural rate of unemployment is influenced by the path of actual unemployment, and hence by shifts in aggregate demand. I review past evidence for hysteresis effects and present new evidence for 20 developed countries. A central finding is that large increases in the natural rate are associated with disinflations, and large decreases with run-ups in inflation. These facts are consistent with hysteresis theories and inconsistent with theories in which the natural rate is independent of aggregate demand.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/845b6cdff241c9b139d2de89310680b1ca0f484f
How researchers see this paper
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In Economics and Econometrics
- Andrea Roventini
- Giovanni Dosi
- M. Virgillito
- Marcelo C. Pereira
- Davide Furceri
- J. Wieland
- Olivier J. Blanchard
- Rafal Raciborski
Citations in the corpus
- The production function methodology for calculating potential growth rates and output gaps (2010, background): “Ball (2009) ascribes, to a large extent, the evolution of the NAWRU / NAIRU since the early 1980s in OECD countries to hysteresis phenomena.”
- Should We Reject the Natural Rate Hypothesis (2018, background): “This approach which has been pursued by a number of authors, in particular Laurence Ball in a number of contributions (for example Ball (2009), (2014)).”
- Abenomics: Preliminary Analysis and Outlook (2014, background): “Laurence Ball (2009) finds that large demand expansions are associated with declines in the natural rate of unemployment and, by implication, increases in potential output.”
- Deep and persistent disadvantage in Australia (2013, background): “Examining trends for 20 developed countries, Ball (2009) concluded that a period of high unemployment arising as a consequence of a downturn in demand during a recession results in a higher natural rate of unemployment which only declines after a long period of strong growth.”
- The effect of financial crises on potential output: New empirical evidence from OECD countries (2012, background): “By weakening the labour market situation, financial crises can lead to an increase in the structural unemployment rate, through hysteresis effects (Ball, 2009).”
- When more Flexibility Yields more Fragility: the Microfoundations of Keynesian Aggregate Unemployment (2017, background): “…is also on this side that the roots of any persistence, in 4 that view, should be found: the hysteresis hypothesis (Blanchard and Summers, 1986 and Ball, 2009) proposes that short-run unemployment rates affect also the long-run equilibrium unemployment rate (the NAIRU, Non Accelerating Inflation…”