Estimating hysteresis effects

Francesco Furlanetto, Ørjan Robstad, Pål Ulvedal and Antoine Lepetit

No 2020/13, Working Paper from Norges Bank

Abstract: In this paper we extend the standard Blanchard-Quah decomposition to enable fluctuations in aggregate demand to have a long-run impact on the productive capacity of the economy through hysteresis effects. These demand shocks are found to be quantitatively important in the US, in particular if the Great Recession is included in the sample. Demand-driven recessions lead to a permanent decline in employment while output per worker is largely unaffected. The negative impact of a permanent decline in investment (including R&D investment) on productivity is compensated by the fact that the least productive workers are disproportionately hit by the shock and exit the labor force.

Keywords: hysteresis; structural vector autoregressions; sign restrictions; longrun restrictions; productivity (search for similar items in EconPapers)
JEL-codes: C32 E24 E32 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-10-07
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://hdl.handle.net/11250/2690092

Related works:
Journal Article: Estimating Hysteresis Effects (2025)
Working Paper: Estimating Hysteresis Effects (2021)
Working Paper: Estimating Hysteresis Effects (2021)
Working Paper: Estimating Hysteresis Effects (2021)
Working Paper: Estimating Hysteresis Effects (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2020_13

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