Hysteresis in the New Keynesian three equation model

Robert Calvert Jump and Paul Levine ()

No 821, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: This paper introduces unemployment hysteresis into a tractable New Keynesian three equation model using an insider-outsider labour market. We demonstrate that strict inflation targeting can lead to a unit root in the unemployment rate, but dual mandate monetary policy can stabilise the economy around its efficient employment rate.

JEL-codes: E24 E31 E32 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2021-09
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-dge, nep-isf, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0821

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