Growth-Employment Relationship and Leijonhufvud's Corridor

Jean-Marie Le Page ()

Post-Print from HAL

Abstract: Since 2008, the euro area unemployment rate has increased constantly, while this economy's GDP was the same at the end of 2012 as it was in 2008. The recent trend of aggregate economic activity in this area illustrates the risk that an economy leaves its stability corridor, in which it usually progresses in a cyclical way, to enter an area of turbulence. In this area, the automatic stabilizers have weak feedback forces. To examine this kind of situation in a theoretical framework, this paper presents a model that relies both on Leijonhufvud's corridor and on Harrod's instability principle. This model allows a threshold to be defined beyond which the economy runs the risk of entering a cumulative process of simultaneous declines in growth and employment. However, the existence of such a process requires unemployment to have a sufficiently direct effect on the growth in aggregate demand, as seems to be the case nowadays.

Keywords: Unemployment rate; hysteresis; unemployment theory; growth employment relationship; economic dynamics; instability principle; Leijonhufvud's corridor (search for similar items in EconPapers)
Date: 2014-06-09
Note: View the original document on HAL open archive server: https://hal.science/hal-04061335
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Recherches Economiques de Louvain - Louvain economic review, 2014, Vol. 80 (2), pp.111-124 [1-22]. ⟨10.3917/rel.802.0111⟩

Downloads: (external link)
https://hal.science/hal-04061335/document (application/pdf)

Related works:
Journal Article: Growth-Employment Relationship and Leijonhufvud's Corridor (2014)
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:hal:journl:hal-04061335

DOI: 10.3917/rel.802.0111

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().