TY  - JOUR
AU  - Ball,Laurence M.
TI  - Hysteresis in Unemployment: Old and New Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14818
PY  - 2009
Y2  - March 2009
UR  - http://www.nber.org/papers/w14818
L1  - http://www.nber.org/papers/w14818.pdf
N1  - Author contact info:
Laurence M. Ball
Department of Economics
Johns Hopkins University
Baltimore, MD 21218
Tel: 410/516-7605
Fax: 410/516-7600
E-Mail: lball@jhu.edu
AB  - This paper argues that hysteresis helps explain the long-run behavior of unemployment.  The natural rate of unemployment is influenced by the path of actual unemployment, and hence by shifts in aggregate demand.  I review past evidence for hysteresis effects and present new evidence for 20 developed countries. A central finding is that large increases in the natural rate are associated with disinflations, and large decreases with run-ups in inflation.  These facts are consistent with hysteresis theories and inconsistent with theories in which the natural rate is independent of aggregate demand.
ER  -