Hysteresis in unemployment and jobless recoveries
IMF - Washington, DC
2014
37 p.
business cycle ; economic model ; economic recession ; economic recovery ; employment ; unemployment
IMF Working Paper
77
Unemployment
English
Bibliogr.
"This paper develops and estimates a general equilibrium rational expectations model with search and multiple equilibria where aggregate shocks have a permanent effect on the unemployment rate. If agents' wealth decreases, the unemployment rate increases for a potentially indefinite period. This makes unemployment rate dynamics path dependent as in Blanchard and Summers (1987). I argue that this feature explains the persistence of the unemployment rate in the U.S. after the Great Recession and over the entire postwar period."
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