Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/331514 
Year of Publication: 
2025
Series/Report no.: 
LEM Working Paper Series No. 2025/32
Publisher: 
Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM), Pisa
Abstract: 
Do temporary aggregate demand shocks have lasting effects, and are they asymmetric between contractions and expansions? Using U.S. data from 1983:Q1-2019:Q4, we identify demand shocks with potential long-run consequences via a Bayesian SVAR and trace their propagation with nonlinear local projections. We îond that negative shocks dominate in the short run, but positive shocks build up over time and by the medium run generate equally persistent effects on output. We investigate the mechanisms behind this result and argue that positive hysteresis is transmitted primarily through the labor market channel: expansions durably lower long-term unemployment and raise labor force participation. By contrast, the capital accumulation and R&D channels transmit predominantly negative hysteresis.
Subjects: 
Hysteresis
SVAR
Nonlinear Local Projections
Asymmetry
JEL: 
C32
E12
E24
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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