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

Laurence Ball and Joern Onken

No 2625, Working Paper Series from European Central Bank

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 OECD. 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 one 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. JEL Classification: E24

Keywords: high-pressure economy; hysteresis; natural rate; unemployment (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-lma and nep-mac
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Hysteresis in unemployment: Evidence from OECD estimates of the natural rate (2022)
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:ecb:ecbwps:20212625

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