Hysteresis in a New Keynesian Model

William Craighead

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines “hysteresis” in which persistent unemployment takes on structural characteristics over time. Hysteresis is modeled as deterioration in labor market matching efficiency as the average duration of unemployment increases. This is embedded in a simple New Keynesian macro model. A decline in labor market matching efficiency would be consistent with the observed rightward shift of the Beveridge curve since the 2007-09 recession. Hysteresis is shown to lead to larger and more persistent responses of the unemployment rate and unemployment duration to productivity, intertemporal preference and monetary shocks. Hysteresis also generates an increase in the natural rate of unemployment.

Keywords: Hysteresis; Unemployment; Labor Market Search (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Date: 2016-04-02
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/70777/1/MPRA_paper_70777.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/75467/1/MPRA_paper_75467.pdf revised version (application/pdf)

Related works:
Journal Article: HYSTERESIS IN A NEW KEYNESIAN MODEL (2019)
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:pra:mprapa:70777

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().