Estimating Hysteresis Effects

Rubio-Ramírez, Juan Francisco, Francesco Furlanetto, Antoine Lepetit, Robstad, Ørjan and Ulvedal, Pål

No 16558, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this paper we identify demand shocks that can have a permanent effect on output through hysteresis effects. We call these shocks permanent demand shocks. They are found to be quantitatively important in the United States, in particular when the Great Recession is included in the sample. Recessions driven by permanent demand shocks lead to a permanent decline in employment and investment (including R&D investment), while output per worker is largely unaffected. We find strong evidence that hysteresis transmits through a rise in long-term unemployment and a decline in labor force participation and disproportionately affects the least productive workers.

JEL-codes: C32 E24 E32 (search for similar items in EconPapers)
Date: 2021-09
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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 (2020)
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