Are Hysteresis Effects Nonlinear?

Damiano Di Francesco and Omar Pietro Carnevale

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: Do temporary aggregate demand shocks have lasting effects, and are they asymmetric between contractions and expansions? Using U.S. data from 1983:Q1-2019:Q4, we identify demand shocks with potential long-run consequences via a Bayesian SVAR and trace their propagation with nonlinear local projections. We find that negative shocks dominate in the short run, but positive shocks build up over time and by the medium run generate equally persistent effects on output. We investigate the mechanisms behind this result and argue that positive hysteresis is transmitted primarily through the labor market channel: expansions durably lower long-term unemployment and raise labor force participation. By contrast, the capital accumulation and R&D channels transmit predominantly negative hysteresis.

Keywords: Hysteresis; SVAR; Nonlinear Local Projections; Asymmetry (search for similar items in EconPapers)
Date: 2025-09-25
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.lem.sssup.it/WPLem/files/2025-32.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.lem.santannapisa.it:443 (certificate verify failed) (http://www.lem.sssup.it/WPLem/files/2025-32.pdf [302 Found]--> https://www.lem.santannapisa.it/WPLem/files/2025-32.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2025/32

Access Statistics for this paper

More papers in LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy Contact information at EDIRC.
Bibliographic data for series maintained by ().