Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249898 
Year of Publication: 
2021
Series/Report no.: 
ECB Working Paper No. 2625
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
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.
Subjects: 
hysteresis
unemployment
natural rate
high-pressure economy
JEL: 
E24
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4912-5
Document Type: 
Working Paper

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