Hysteresis in unemployment: Evidence from OECD estimates of the natural rate

Laurence Ball and Joern Onken

International Finance, 2022, vol. 25, issue 3, 268-284

Abstract: This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real‐time estimates for 29 countries from the Organization for Economic Cooperation and Development. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our baseline specification, a one‐percentage‐point deviation of u from u* for 1 year has a long‐run effect of 0.16 points on both variables. When we allow asymmetry, we find, perhaps surprisingly, that decreases in u have larger long‐run effects than increases in u.

Date: 2022
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https://doi.org/10.1111/infi.12424

Related works:
Working Paper: Hysteresis in unemployment: evidence from OECD estimates of the natural rate (2021)
Working Paper: Hysteresis in Unemployment: Evidence from OECD Estimates of the Natural Rate (2021)
Working Paper: Hysteresis in Unemployment: Evidence from OECD Estimates of the Natural Rate (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:25:y:2022:i:3:p:268-284

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